Financial Control: A good way out in times of crisis

financial control in times of crisis
Excel Spreadsheets

In this article we will talk about:

What is the best way out in times of crisis?

That the Brazilian economy is going badly everyone knows and, maybe at a higher or lower level, your business is being affected by it. There has been a lot of talk in crisis, and when your business numbers are affected, a lot of ideas come up to improve your company's financial control and performance.

Financial Control: A good way out in times of crisis 1

There are usually two paths. On the one hand, you'll see managers advocating for increased sales, which usually demand more investment and spending in a general way. Although it is a possible solution, I do not like it so much, since if the strategy does not work, you will sink even more into losses and, perhaps, debts.

On the other hand, there will always be the possibility (somewhat more conservative) of more regulated financial control. In my opinion, this is the best way out in times of crisis, as it is a clear way for you to continue the business of the company at a much lower cost.

Perhaps the most complicated thing here is knowing exactly what to do in order to keep the same operating structure of the business by spending less. Let's see what you can analyze in your financial control.

What to look for when doing financial control

To start, it is worth understanding that to do financial control of your business and a tool is necessary to make this process as automatic as possible. If you do not already have an option or are unsatisfied with the one you use, I recommend Sheet Cash Flow from light.

Regardless of the tool you use, when I am doing the financial control of a company focused on cost reduction, I like an approach focused on two main analyzes:

  • Expense Analysis
  • Analysis of projections

Starting with the expense analysis, it's worth going from a more general focus to the specific one. To do this, the first step is to check your spending division from month to month to find cost reduction opportunities.

Below is an analysis of the division of expenses for a particular month of a company.

financial control in times of crisis - analysis of expenditure graphs

It was R $ 45.000 of expenses, being a higher percentage for expenses with products (direct costs) and expenses with HR. Other than that, we can still see some relevance in operating expenses and marketing.

Now we will see the analysis of the financial control of the following month to which we analyzed:

financial control in times of crisis - analysis of expenses graphs another month

Notice that we had an increase of R $ 15.000 in the expenses of the company. If we observe, we will see that this increase was driven by the marketing expenses that increased to 38% of relevance in relation to the total.

Here we already have a clear path and other possibilities:

  • Reduce marketing expenses
  • Renegotiate contracts with suppliers of raw materials (to lower direct costs)
  • Analyze the possibility of lowering the staff (to lower HR expenses)

Just as an example, after discovering relevant expenditure groups that can be reduced, the next step is to analyze the graphs (or numbers) of them and see what can be dried. See the marketing expense chart:

financial control in times of crisis - cost cutting analysis

As a matter of fact, spending on sponsored links - adwords consumes most of the marketing expenses. Because of this, it is worth reducing your spending and optimizing your results with slightly smaller amounts.

This is just one example of financial control focused on cost reduction, this process can and should be used for any group of expenses that is relevant to your business, so you find ways to reduce costs and maintain profitability even with revenue reduction .

Financial Control: A good way out in times of crisis 1

Our second financial control is the analysis of projections of income and expenses. Basically, when your business is going through a crisis (that may be general or just your own company) it is important to do an exercise in understanding the possible future scenarios to get a good financial control.

For this, it is necessary to make a projection of income and expenses, as well as follow the result. See below the forecast of inputs and outputs in blue, as well as the actual result in gray for a given month.

financial control in times of crisis - projection

Note that although our projection expected a profit of R $ 20.000, in fact we had a loss of R $ 5.000.

This is the starting point for improving your projections and, consequently, the results seeking a good way out of the crisis. As I said at the beginning, instead of looking at how to improve revenue, let's understand how to reduce costs.

The way is simple, just look where you've gone wrong, by how much and look for ways to reduce those expenses. In our example above, we would have to reduce at least R $ 5.000 of direct expenses and at least R $ 10.000 of indirect expenses.

The right tool for financial control of your business

As you may have realized, while it is not difficult to make good financial control to get your company out of the crisis, it can be very complicated to have the right arguments and convincing power of managers or employees to reduce expenses.

Financial Control: A good way out in times of crisis 1

At such times, having a tool such as spreadsheet cash flow for financial control is the perfect foundation for your decision-making.

know more about cash flow.

Excel Spreadsheets


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