The Impact Of Financial Control On Business Survival

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Financial Control is a major contributory factor to business survival. For many managers, exercising effective financial control is, at best, seen as a mystery and, at worst, not even considered. Yet monitoring a small number of important figures can ensure that you retain complete and effective financial control. A budget is a financial plan. It is a projection (forecast) of what will happen financially if certain strategies and decisions are implemented. This is something we all do from time to time. Objectives To ensure that a business is estimating costs accurately and then keeping them under control; to ensure that a business are charging and/or paying the right price; and to ensure that a business can collect money owed to them and…show more content…
Control can then be exercised by comparing actual performance with budget. To do this, a business will need to produce: • A financial plan, agreed as being achievable by all concerned; and, • Some means of monitoring performance against the plan. Since there will always be differences between the actual and the plan, a business will need some form of control. Beyond a certain organisational size, control can only be exercised by delegation; the human aspect of control is, therefore, important. Accurate record keeping is required if a business will be effective in monitoring performance against budget. Other reasons why a business will need to keep accurate records are: • There is a legal obligation to do so; • Any shareholders may want accounts; • The VAT inspectors will need them; • HM Revenue and Customs will require them; • Potential suppliers may require them; • A business will need to report accurate figures to their stakeholders; • A business will need to identify areas of possible concern; and, • A business will need to investigate and explain variances (under or overspends against your budget). Accounting records will need to be detailed enough for a business to be able to say at any one time what the financial position is; i.e., how much cash is in the business or the budget? How much do they owe? How much is owed to them? How big is the overdraft (or overspend)? How long could bills be paid for if cash
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