Everything you need to know to manage your financial

financial area
Excel Spreadsheets

The financial area is one of the most important parts of any business. I say this because no company survives without a cash flow positive for a long time. The equation is simple, if you have more income than expenses, you get money to invest in new hires, renovations, marketing actions and other investments. If you do not have it, you start to have losses, you need capital and, if you do not change your situation, you go bankrupt.

Pac FIn

For these and others that manage your financial it's essential. Throughout this article I will talk about the main activities that should be performed to manage your finances. Some of them are:

  1. Payment Control
  2. Receipt Control
  3. Financial reports
  4. Financial planning
  5. Mandatory General Controls
  6. Other activities

Now let's look at each of these activities in detail

1. Payment Control

When we talk about finances, if there is one thing that can not escape are the payments. We can divide this area of ​​accounts payable into 2 types:

  • Accounts payable for the month

These are the accounts that will win in the current month. Normally your monthly fixed expenses are included here, such as rent, salaries, pro labore, accountant, among others. If you're making this process of paying bills well done, you'll get a view of your total payable in the month and how much you've already paid for it. Here's an example of our accounts payable worksheet:

financial area - accounts payable

In addition to these accounts, depending on the type of agreement you have with suppliers, other expenses can enter the list. Now, if you know how to trade well, you will always push the maximum of payments for future dates, which leads to the second type of accounts payable.

  • Future payments

This control is a little more sensitive and has a greater facility to get out of control, as it is not a very short-term (same month) commitment. So having control of everything you need to pay will help you not get into debt due to financial control problems.

A simple form of control is to post payments on a worksheet and track their status. In our example we have payments made on time, with arrears and some that have not yet been paid:

financial area - accounts payable

When making these future releases, the idea is to always keep in mind what your cash need is for the next few months. In our example, we would have R $ 40.000 to pay in arrears, which could mean a good portion of the free cash of a small company.

  • Quick Tip on Payments

To better organize cash outflows, set the right days to make payments to vendors, so you do not get lost and do not risk running out of cash in the middle of the month without even noticing. Here at LUZ we make our payments always on 5 or on 20.

2. Receipt Control

If life were just pay we would all be lost. Therefore, the other side of the financial control currency is the organization of your receipts. Just as we had 2 types of accounts payable, we will also have 2 types of accounts receivable:

  • Cash receipts:

This is the best way to get money, when it goes straight to your cashier, ends the risk of default or working capital problems due to future receipts. Whenever you can choose, I believe that is the best way. The problem is that for high payments or for some types of markets, future payments are required.

  • Future receipts

Within future receipts, there are two ways your company can adopt.

- The first when your company receives payments on credit (from a payment gateway, machine or any other automatic form). This money is already yours and you are guaranteed for the future.

- The second one is a bit more concerning, which is when you install the provision of a service or even the sale of a product. In this case, it's up to the company to make the payments on the combined dates, so it's worth a collection effort if that value is representative for your business.

Regardless of how this payment is made, it is important to have control of what may come in the future or what is scheduled. See a report (for the month of January) of our Accounts Receivable worksheet:

financial area - accounts receivable

See that we have 2 receipts and a total of 3 outstanding accounts. If this outstanding amount does not get into your box, there's a good chance you're going to get hurt, so stay tuned and charge when you need it.

  • Quick Tip on Receipts

If you use a payment gateway or you have cash receipts at some bank and need cash as a matter of urgency, consider making advances. Although there is a payout rate, this down payment can take the rope from your neck and allow a larger working capital to pay bills for the current month.

Pac FIn

3. Financial reports

Everything we have said so far about account payable and receivable should culminate in the analysis of your financial reports. There are 4 general and most important reports:

  • Cash flow
  • DRE (Statement of Income for the Year)
  • Bills to pay
  • Bills to receive

See an example of a cash flow report from our spreadsheet cash flow:

Manual Report - Cash Flow Report

See that it has, in a concise way, the initial balance of the month, the revenues and expenses (which actually happened), shows the profit or loss and the total value accumulated as well as the profitability of the business.

Now, as I said, this is a simplified cash flow depending on the type of business you have, you may need to make more advanced controls and that is why in those cases you may need to customize the control tool that you use. Let's look at four more advanced Cash Flow applications that are already customized and ready for use. You can find them in the Complete Financial Control Worksheet:

  • Bank Analysis

This case is important if you have an account in more than one bank and you want to make control of what goes into each of the accounts to always have money in the box and not go red in any of them. This may prevent you from entering special limits at high interest rates or having to make last minute transfers.

  • Customer and Supplier Analysis

This type of control is interesting for businesses that have few repeat customers or many customers with a relatively large number of customers. Also, if you have many vendors and need to manage the money you spend the most, it's the kind of report that can help you understand that.

  • Form of Payment Analysis

Note that when making any postings, you need to sort the revenue / expense on an account chart, a bank, and a form of payment, which generates custom reports in other tabs of the worksheet:

financial area - banc and form of payment

In addition to allowing banks to analyze, this type of advanced report is useful for anyone looking at differentiated payments (view, debit, credit on different flags or other payment gateways)

  • Cost Centers

It is quite useful to understand how to use cost center for companies that have branch offices and want to see their flow in comparison with the matrix or for businesses that have more than one relevant area that generates revenues and costs (service companies and consulting firms are an example). Below is a specific report for an affiliate:

cost center - cash flow by cost center

Remembering that these forms of analysis are not mandatory, they will depend on your type of business and how you organize yourself. I have just listed here to show you the possibilities of financial reports that exist. Obviously, the more complex, the more work you will have to control your finances, so always choose the essential options for your business.

Anyway, if you got here, you're better than many people who barely analyze the financial, but there are still some important items missing.

4. Financial planning

If before we were talking about the basics and essential for any financial control, let's start entering now a slightly more advanced part of planning.

In my opinion, the first step in good financial planning involves calculating how much your business needs to sell to tie and not have loss. I have this opinion because it's no use planning a number if it is below the minimum required.

I will not go into the merits of how to do the balance point calculation, because we already deal with this in other 2 excellent blog posts here, one about how to calculate the Point of Equilibrium and another on how to discover the Balance Point of various products. Most importantly, you have the notion that getting to that number is important. Here's an example of our balance point calculation worksheet:

Break-even worksheet - Break-even point by product

See if the calculation is well done, you'll get a sense of how many units a given product needs to sell in order for your revenue to tie in with your expenses, ie this is going to be the minimum of your planning. But this is only the first step, there are still other ways to design your sales.

Other Ways to Plan Your Finances

If you have already taken the first step towards full financial planning, it is worth pursuing and taking the second step, which is the projections:

  • Budget

The business financial budget is an estimate of incoming and outgoing money in a month. It is closely linked to everything we have said so far, the only difference is that here you will design numbers, which may be based on different methods, according to information and data that you have.

Let's see an image of the actual result graphs x budgeted in our budget worksheet:

budget template

  • Budgetary Control and Financial Projection

Finally, within a financial projection, it is worth distributing your budget among the major types of income and expenses to find out where the bottlenecks are. In the example of our complete financial control sheet below, we show the division between operating revenues, direct and indirect expenses, taxes, contribution margin, non-operating (financial) result, profit or loss and investments:

Financial Projection - DRE planned x performed

With this vision you can determine where your business can improve. This is even easier with a detailed analysis of your accounts in the DRE (Financial Statement of Income) financial reports.

5. Mandatory General Controls

Continuing with the organization of the financial area of ​​your business, we arrive at the part of general controls, almost mandatory in most companies. These are controls such as:

  • Issuance of invoices
  • Control of incoming checks
  • Fiscal, accounting and DP follow up with accounting
  • Decisions on investment
  • Financing decisions

6. Other activities

Finally, there are some activities that are mostly carried out in medium and large companies. As they will only be used in some cases, I left it to the end, but that does not mean that they are less important and that they do not deserve attention:

  • Balance Sheet Valuation

Usually the balance sheet can be an activity left for your accountant to complete. However, if your company needs economic financial analysis, it may make sense to have the financier organizing this type of statement.

Below I show the unfinished structure of a balance sheet in the balance sheet sheet:

Economic and financial valuation

This type of report can be very useful when analyzing the assets of the company when you are thinking about a merger or even when you are acquiring other companies or yours.

  • Valuation

Following this same line of thought, but now being used even in smaller companies or studies for acquisition of investments there is the valuation of the value of the company. With our Valuation worksheet you can get into a panel like the one below:

financial area - valuation

This report shows data such as NPV (net present value), IRR (internal rate of return), Payback, EBITDA and business value. That is, it is an ideal tool for times when you intend to sell your company or at least have an idea of ​​how much it is worth in market value.

Full Financial

To close, there are 4 tips that I believe are essential to the financial departments or departments of any company:

  • Transparency - Present financial data openly to your employees. This can make them more concerned about their costs and more motivated to seek new sources of revenue
  • Automation - whenever it can automate all financial activities. Here in LUZ the whole issue of invoices is made automatically after the purchase and identification of customers
  • Simplification - If you have a simpler method, opt for it. Obviously no choice for loss of information, but the more complicated your financial is, the less result it will give you
  • Organization - Do not use notebooks to jot down your financial. Nowadays there are excellent ready-made spreadsheets or systems that help you organize your financial data and give you less work

To help you, we made a business finance spreadsheet package which encompass all these areas that we pass through the article. Worth knowing. In addition to looking at all the financial spreadsheets from light.

And you, do something different from what we say and that works in your day to day? Share with us in the comments.

Pac FIn

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Administrator and turismologist, passionate about the possibilities that Excel gives to managers, entrepreneurs and students. He is the managing partner of the spreadsheet department at LUZ - Spreadsheets (luz.vc) and is responsible for the development of spreadsheets with business and personal focus commercialized in its website. He also teaches online Excel courses (cursos.luz.vc) and likes to help thousands of planners through the LUZ Forum and Blog.


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