How Can Firms Exercise More Control Over Their Finances?

Financial management is a crucial determinant of business survival and success. Firms striving for sustainable growth need to exercise more control over their finances to maintain a healthy cash flow, make informed business decisions, and ensure their financial stability.
As one might expect, managing finances well is easier said than done. Unfortunately, the number of firms in financial stress has risen sharply recently. Despite employing all the tactics they can think of, many entrepreneurs might feel like their businesses’ financial stability is out of their control and influenced more than ever by external factors; the state of the economy, consumer spending, etc.
However, entrepreneurs should still have both hands on the steering wheel. They can still have a few tricks up their sleeves that might help them better their situation. We detail some of these strategies down below.
Investing in Financial Literacy and Skills
Increasing financial literacy among staff is the starting point for firms aiming to exert more control over their finances. While businesses often have dedicated finance departments, it’s beneficial for all employees to have a basic understanding of financial principles and practices.
Financial literacy can enhance strategic thinking and decision-making across the company, helping to align business activities with the company’s financial objectives. It can also increase employees’ awareness of the financial implications of their actions, promoting more cost-effective behaviours.
It may even be worth trimming the fat around certain roles, as there are many tasks employees do that can seem pointless. The old saying is true; time is money in the business environment. The more effectively workers use their time, the more money a business can save.
Investing in staff training can also be advantageous. For example, training staff to use financial software or to interpret financial reports can make your financial management more effective and enhance financial control. All of your subsequent efforts toward financial control can influence everybody, and there’ll be a confident energy surging through the business when these tasks are underway.
Budgeting and Forecasting
Budgeting and forecasting are crucial for firms seeking more control over their finances. A well-crafted budget offers a roadmap for firms, guiding their spending to ensure they remain within their financial capacity.
Budgeting helps firms to allocate their resources strategically, ensuring their funds are directed towards activities that generate the most value. This not only prevents unnecessary expenditure but also improves the firm’s financial efficiency, leading to increased financial control.
Forecasting, on the other hand, allows firms to anticipate future financial scenarios, enabling them to plan and prepare accordingly. By predicting future revenues and expenses, firms can identify potential financial risks and opportunities, allowing them to take proactive measures to enhance their financial control.
Admittedly, this is pretty basic stuff. However, people can interpret budgets incorrectly, just as Chancellor Jeremy Hunt did in his own so-called ‘growth budget’ earlier in 2023. There can be huge oversights and misfires with budgeting goals, so reevaluating the importance of these initiatives is crucial.
Embracing Online Business Accounts
Businesses have been digitally transformed in recent times, and financial management techniques have been influenced by these changes too. Business leaders would be foolish to resist the future.
Online business banking, a product of this digital revolution, allows businesses to simplify their financial management while enhancing their control over finances. For instance, Silverbird, a company led by Max Faldin, provides comprehensive digital banking solutions designed to meet diverse business needs. They make opening an online business bank account equipped for seamless global transactions easier than ever.
Silverbird’s online business accounts feature real-time transaction data, enabling businesses to monitor their cash flow promptly and effectively. Furthermore, it automatically categorises expenses, giving businesses a more comprehensive view of their spending. With such information at their fingertips, firms can make timely and informed decisions, enhancing their financial control.
Besides real-time data and expense categorisation, Silverbird’s digital business accounts offer automated invoicing. This feature allows businesses to track and manage their receivables efficiently, reducing the chance of cash flow issues due to late or forgotten payments. By leveraging such functionalities, firms can simplify their financial management process and improve their financial performance and control.
Harnessing Financial Technologies (FinTech)
In recent years, FinTech has emerged as a game-changer in the financial management landscape. By leveraging FinTech solutions, firms can automate and streamline their financial processes, leading to enhanced efficiency and control.
For instance, AI-powered financial tools can analyse large volumes of financial data quickly and accurately, providing businesses with real-time insights into their financial health. This enables firms to make quick, data-driven financial decisions, improving their financial control.
Similarly, blockchain technology can enhance financial transparency, making it easier for businesses to track and trace financial transactions. This increases accountability and reduces financial fraud risk, strengthening a firm’s financial control.
Regular Financial Audits
Financial audits are an integral part of sound financial management. Through an audit, a firm can verify the accuracy of its financial records, ensure compliance with tax laws, and identify any potential financial issues that might pose risks to its stability.
Regular financial audits can uncover discrepancies and irregularities in a firm’s financial statements, enabling it to take corrective actions promptly. By addressing these issues early, a company can maintain a solid financial footing, thereby gaining better control over its finances.
Moreover, financial audits can reveal areas of inefficiencies, waste, or mismanagement. By identifying these areas, firms can optimise their financial operations, leading to cost savings and improved financial control.
Still, it’s also worth noting that the UK auditing itself can be controversial at times, with some auditing firms frowned upon and certain regulations causing complications too. To exercise the greatest amount of financial autonomy possible, firms should take great care when choosing the auditors they’d like to work with.
Establishing Robust Internal Controls
Robust internal controls are essential for maintaining control over a firm’s finances. These can range from approval processes for expenditure, segregation of duties to avoid fraud, to periodic reconciliations to ensure the accuracy of financial records.
Controls, like regular cross-checks of financial transactions, can help firms detect any anomalies quickly, enabling them to take remedial action and avoid financial loss. Regular checks also discourage fraudulent activity, providing an added layer of protection for a firm’s finances.
Furthermore, internal controls can help firms meet their financial regulatory obligations. This reduces the risk of penalties and legal problems that can impact a firm’s financial health and reputation.
Improving Liquidity Management
Effective liquidity management is crucial for financial control. Firms need to ensure they have sufficient cash to meet their short-term liabilities as they fall due.
Practices such as maintaining an optimal cash reserve, efficient inventory management, prompt invoicing, and timely collection of receivables can help firms optimise their liquidity. This not only reduces the risk of insolvency but also enhances a firm’s ability to seize profitable opportunities, leading to improved financial control.
Of course, effective liquidity management goes beyond merely avoiding insolvency; it forms the bedrock of a firm’s ability to take advantage of growth opportunities and manage financial risks. When a firm has a robust liquidity management system in place, it can swiftly adapt to the changing dynamics of the business environment, seize opportunities as they arise, and mitigate potential risks.
Furthermore, successful liquidity management instils confidence among stakeholders, including investors, employees, and creditors, contributing to a positive business reputation and improved relations. Consequently, liquidity management is an enabler for business growth and stability, contributing significantly to a firm’s overarching financial strategy.