When you operate a small business, every dollar counts – and every dollar must be tracked, monitored, and managed accurately and properly.

You work hard to ensure that your business runs smoothly and successfully and having good financial management and financial control is an important step towards continued growth.

The Difference Between “Having Control” and “Being in Control” of Your Business Finances

It is normal for a sole trader or small business owner to be reluctant to hand over control of finances to someone else, whether that someone is an external accountant or bookkeeper. Or you may already even rely on your admin staff or an in-house accounts person to file taxes, send invoices on time, and do a good job with outstanding payments. It may be the cost or even the trust factor which creates that initial hesitation of letting a total stranger manage your hard-earned cash – how can you be sure that person is doing the right thing? The answer: financial controls.

Without a doubt, you may be great at what you do as a sole trader or small business owner (whether you are a tradie, contractor, start-up, online e-commerce business or any type of small business for that matter) – but the undeniable truth of the matter is this: without the proper background and experience in accounting and financial management, you will never know if your financial reports are truly accurate or lacking in vital information about your businesses’ health.

Taking a step back and being honest with yourself about how your business’s finances are managed is important. Are you confident that you have processes and procedures in place – the “financial controls” which we’ve referred to – to ensure your income and spending is effectively managed? Without adequate financial controls, your business can be vulnerable to such things as employee fraud, cash flow problems, and even bankruptcy.

The Importance of Financial Controls for BOTH Start-Ups and Mature Small Businesses Alike

As a Start-Up

During the early phases, most businesses incur losses and have negative cash flows. During this period, financial management is critical. Directors and/or Business Owners must ensure that they have adequate cash on hand to pay staff and suppliers, even if the organisation is losing money. This means that the owner must make accurate financial projections of these negative cash flows to determine how much money will be required to support the business until it becomes profitable.

As a Growing Business or “Mature” Small Business

As a company develops and matures (no matter how long it’s been around). it will require more cash to fund its expansion. It is critical to plan for and budget for these financial requirements. Having the right finance professional is important in this stage, to guide you through potential roadblocks to growth and provide you with the information and knowledge on how to make the best decision on whether to fund expansion internally (bring in more business partners or potential investors) or take out a loan from external lenders. Financial management (which includes financial controls) covers the ability to find the most cost-effective source of finance for growth, monitor the business’s cost of capital, and prevent the balance sheet from being overly burdened with debt, which can harm the business’s credit rating.

Solve Accounting – Your Trusted Financial Controls Adviser

A Virtual CFO has the skills of a professional accountant and financial controller, without the need to hire extra staff. They can provide you with the advice to set up adequate financial controls and can help you better manage your cash flow, reduce operating costs, and identify growth opportunities – working with you to better understand your business’s finances.

Speak with Philip Khao from Solve Accounting on 0412651779 or at philip@solveaccounting.com.au to find out more about Virtual CFO services.

Philip Khao is a Chartered Accountant (CA), Virtual CFO professional and Director at Solve Accounting with many years of accounting and business services experience at global accounting firms and multinational corporations.