Importance of controlling expenses and income in a company

One of the most important tasks related to financial management is the control of expenses and income in a company. And not only because of the benefits that it can bring, but especially because of the inconveniences and risks that it can avoid, even avoiding losses that mean the closure of the company.

What is the control of expenses and income

The control of expenses and income can be defined as a financial strategy that consists of identifying and monitoring the movements of income and expenses to improve the profit and competitiveness of the company.

By controlling expenses and income, you can compare different periods in time and measure profitability and results to make decisions.

Why is the control of expenses and income important?

The control of expenses and income in a company is essential to calculate the profitability of the activity and to be able to implement changes in it to solve problems that affect profits.

If the income and expenses are updated, it will be possible to know the financial situation and calculate the available resources . In addition, it will help to have all aspects of the activity ordered.

In the case of the self-employed, it will also be the information they will use to submit quarterly and annual tax returns and will serve to make forecasts for the future.

SMEs need to keep track of expenses and income to keep the accounts up to date and prepare the annual accounts .

It is useful for all types of activity and company since it allows to know data on defaults, collections and pending payments and other relevant information.

Benefits of controlling expenses and income

Keeping a correct control of expenses and income entails important benefits since it can save costs, allows planning long-term objectives and the decisions that are made will be more accurate.

Propose long-term goals

The control of expenses and income allows to establish goals because it helps to know in what economic situation the company is .

Have access to important information

Through financial control it is possible to know on what date an invoice is collected or when a supplier must be paid. Having this data always available is very important for making decisions .

Reduce expenses

With well-organized information, it is possible to determine how much money is being invested in each thing and it is possible to reduce any expense that is excessive.

Make effective decisions

Having a good financial organization it will be possible to make decisions and assume financial commitments , such as requesting a loan or making an investment, more easily and accurately.

How to keep a correct control of expenses and income

There are different ways to keep track of expenses and income and it will depend fundamentally on the needs and characteristics of the company.

Basic accounting using spreadsheets

One of the simplest and cheapest solutions to keep a correct control of expenses and income is to use a spreadsheet.

This tool has the advantage of being accessible to everyone and easy to use . You can also include more complex formulas that automate some processes and generate graphics.

The most widely used spreadsheet application is Excel , which is part of the Microsoft Office suite but there are also free applications that can be used to keep track of expenses and income.

Accounting programs and applications

There is a wide variety of accounting programs and applications on the market, so it is possible to find one that suits the needs of each company.

Some accounting applications are very easy to use and allow you to keep track of expenses and income without having to use complex formulas in the spreadsheet or resort to an expensive ERP.

This type of software allows financial control and usually has some features such as preparing reports, creating invoices or preparing quarterly and annual tax returns.

ERPs or enterprise resource planning programs

ERP or Enterprise Resource Planning programs are the most complete solutions for comprehensive business management.

These types of applications are not only used to manage accounting, but can also keep track of inventory, sales and human resources, as well as carry out bank reconciliation.

They are comprehensive solutions that affect several areas of the company, which is why they tend to be more complex to adapt and implement , and it is common to need the help of a specialized consultant.

ERPs have many advantages, since they save time due to the automation of processes that they entail, allow information to be shared, and can be customized to adapt to business needs. The control of expenses and income is the process by which all movements of this type in a company are identified. It is very important since it allows to know the financial situation of the company. Among the benefits it provides we find a reduction in expenses, better financial decisions and the possibility of establishing long-term goals. It can be carried out in a spreadsheet, an accounting program or an ERP.

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