Tactics on Financial Management and Budget Control

Do you know what tactics to apply to keep your financial planning in the blue?

What do you need to do to keep your business cash away from working capital, high interest rates, and recurring debt?

1) Sales Forecast

To keep your financial planning in the blue, the first tactic is to know the company’s sales forecast with leads and customers.

This means that you need to control this process through a sales funnel .

Whether it’s industry, commerce, or service, there are always ways to map sales conversion , which is the percentage of customers who buy, against those who show interest in some way.

By understanding the sales process and the conversion percentage, you can make revenue estimates and program your cashier not to go red.

2) Control of Operating Expenses

No one gets rich by tracking fixed expenses, but this control is critical to gaining scale and margin in your business.

The leaner your company is, the more stability of results you will have and thus the less headache with a lot of expenses, unforeseen and negative cash.

Look at your competitors, other markets, and see how much is spent on average to keep the business going, even if no sales are made.

You need to know at your fingertips the total monthly fixed expenses, whether administrative, personnel, business, etc. So any unusual variations you’ll know where you came from and what to do to solve.

In the end, this control is fundamental, because the lower your expenses, the lower the break-even point , that is, the point at which the company can pay and make a profit. And on the other hand, the more sales there are, the more margin you will earn, thus keeping your financial planning in the blue.

3) Debt Control

Student loan debt concept. Young woman with heavy box full of debt carrying it up the education ladder

There are two types of debt: good and bad.

Good debt is one that you use to leverage your business by investing in people, equipment, projects, etc.

For a debt to be good, it must, of necessity, have a lower cost than the return on which you will invest (ROI). And of course, the lower this cost, the more likely your investment projects will make good returns.

In Brazil, the cost of credit is still very expensive, but there are good options in the market, such as secured mortgage , which operates in a range between 1.3% per month and 2% per month.

This is a great solution for clearing more expensive debts and putting the cash back in blue.

Bad debt, in turn, is one that increases your cost of capital without increasing the company’s profitability.

Example : You run $ 100,000 from the bank at 3% am to invest in a project that will give you a 2.5% am return Summary: You are destroying your business value.

If instead of 3%, if you use the modality described above, with a cost of 2%, then it would be generating value for the company and this debt would leverage its results, that is, it would become a good debt!

4) Control of Average Deadlines

The average receipt, payment and stocking times alone are responsible for the bankruptcy of thousands of companies in Brazil and worldwide.

Let’s look at an example to make it easier:

  • After making a sale, you wait an average of 30 days to receive the money at the bank;
  • And let’s say when you buy raw material or merchandise, you have to pay the supplier in 20 days.

Realize that you pay the supplier in 20 days, you have 10 days with no money in your pocket and in 30 days you receive the money from the customer.

What happens in those “10 days without money”? Simple, you will have to use bank money, usually overdraft, and will pay a truck for interest.

This situation is very typical and, as I said, can easily take your business to the canvas. To avoid this situation, there are some alternatives:

  • Reduce customer lead times
  • Increase payment deadlines with suppliers
  • Embed interest, for the period without cash, on sales. The lower this interest, the better for the customer (lower final price) and for you, who will sell more and better.

Can’t do any of this in your business and need to constantly raise funds? Then again, the lower the cost of the loan, the better.

Reinforcing, these tactics are effective for industries, trades and services. To keep your financial planning in the blue, you need to apply it to your business.

Especially in Brazil, which is emerging from an economic crisis. Now is the right time to invest in new projects, expand the market, improve performance and bring good people in.

And for all this to be possible, it takes good financial planning, and of course, always stay in the blue!