Financial Organization Can Help You Manage Your Company | Payday Loans




According to Sebrae, the mortality rate of small and medium-sized enterprises in Brazil is more than 40%. These are data that consider the first 2 years after the opening of the firm. A significant part of the bankruptcies is due to the lack of financial organization and the poor management of the company’s money. See for an illustration

It is very common for small and medium-sized enterprises to be created in situations of need, being conducted by inexperienced and untrained managers. In addition, there is a lot of informality in management, with the accounts of the owners constantly mixing with those of the business. In this way, one can directly link the lack of financial organization to the mismanagement of these companies.

In this article we will deal specifically with the financial organization . How to deal well with company money? How to create simple and useful controls to keep the business reins? This is the theme of this text. Check out the unmissable content contained in the following topics.

The principles of financial organization

The principles of financial organization

Before we work on the topic, we need to highlight some principles of financial organization. These principles should guide all actions, so we should only act in line with such rules. Come on:

Profit and cash are different things


Yes, many entrepreneurs understand that profit and cash are the same. However, such an understanding can not be more wrong. Profit is the economic result of the company’s wealth generation in one period. Cash is the amount of financial resources extracted from the organization’s operation.

Imagine that a store sold $ 50,000 in a given month, having made $ 30,000 in payments over the same period. At first glance, we understand that there was R $ 20,000 in profit, but we did not consider the outstanding accounts, nor the expenses that do not influence the cash, such as depreciation.

In order to obtain the profit value, it is essential to observe the DRE (statement of income for the year) . For the measurement of the cash, the DFC (cash flow statement) must be observed. Without these tools, the entrepreneur can pick up the cashier and simply put it in his pocket, damaging the company in future periods.

Personal accounts can not mix with company accounts


Another common problem seen in small and medium businesses is the use of resources for personal purposes. There are even cases of large, often family-owned companies in which cash resources are used for personal purposes. There is nothing illegal about this, the problem is the disorganization generated by the practice, as well as the deficit in the firm’s operating accounts.

The money of the company must be the money of the company, the needs of the partners must be recorded as withdrawals or payment of dividends. If there are bills on the pay list such as household food, school fees, and the like, the company may become loss-making. It is therefore important that the members’ accounts are not mixed with those of the firm.

Working capital should not be mixed with capital for investments


A very common problem to be encountered in small and medium-sized companies is the short-term decapitalization. When business is booming, many entrepreneurs are thrilled and realize expanding investments. These investments are very important for the growth of the firm, but can not be made using working capital.

When the company assumes costs of reforms, new machines, investment in technology, etc. they need to be sure that working capital will not be consumed. As the name already says, working capital needs to spin. The term of return of this capital to the company’s cash should occur in the short term, usually 30, 60 or 90 days.

Investment capital will take a longer time to return. It will make profits rise, but this will only happen in the medium to long term. Until then, the company needs to keep its working capital preserved. If the company decapitalizes to finance the investments, it can become insolvent and until it reaches the break.


Before granting deadlines, the availability of working capital should be


Commercial expansion policies can be promoted through price discounts or granting of credit. When there are market pressures to get better prices and deadlines, many companies end up giving in before assessing the circumstances. In general, giving more time seems to be less damaging to the firm than giving discounts, but in many cases, the opposite is true.

Imagine a clothing store that works with an average gross margin of 45%. She has the option to give 10% discount in cash or install the purchase 2 times. When the installment occurs, the credit card discount is 3% and the money takes 45 days [(30d + 60d) / 2] to return to the cashier. If the company’s capital costs 5% per month, the expenditure on the term will be 7.63% (capital) + 3% (card fee), or 10.63%.

In the previous case, it would be more interesting to grant cash discounts than to give customers more time. But even if the cost of the term were less, it would be necessary to think twice before granting it. This is because the emptying of the cash can leave the company without the capacity to honor with its commitments.

Until a good capital reserve is made, it is often better to sacrifice a little profitability than to empty the cash and run the risk of insolvency. Therefore, the deadlines policy should be very well thought out by entrepreneurs of all branches.Controlling working capital

If it were to elect the best advice for small and medium-sized financial organization, it would be: control working capital . Not by chance, this is the greatest difficulty of Brazilian business. There are extremely competitive companies with great products, but they end up breaking down due to failures in working capital management.

But what would be the control of working capital? Well, it can be said that a company that manages to pay all its current accounts using only operational resources is correctly managing working capital. In order to measure the amount of working capital necessary for the operation of the company, appropriate financial metrics should be used.

The financial organization of the company basically depends on 3 metrics, they are:

  • PMP – average payment term
  • PMR – average repayment term
  • SME – average storage time

The average payment term (PMP) can be obtained from the policy of deadlines practiced by the company’s suppliers. Imagine a firm that has the following purchasing structure:

  • 30% of purchases are made in cash
  • 45% of purchases are paid in 30 days
  • 25% of purchases are paid in 45 days.

The PMP, the average payment term , will be the weighted sum of all the maturities, ie: (0.3 × 0) + (0.45 × 30) + (0.25 × 45) = 24.75, or simply 24 days on average (round down).

The PMR is the average term of receipt , which is calculated using the same PMP methodology. The only difference is that it is used as data source, the deadlines granted to the company’s customers. The SME in turn, is measured from the firm’s inventory data, its calculation takes place as follows:

The average stock is obtained by dividing the inventory change by 2. Thus: (stock year B – stock year A) / 2.

After obtaining the average stock, simply divide the result by the average cost value of the goods. Thus, if the average stock is 300 and the average cost is 10. The SME will be 300/10, that is, 30 days.

Once the value of the three financial variables has been obtained, the following account should be made: PME + PMR – PMP. The result of the account reveals the financial cycle of the company. Let’s say in our example, the PMR is 45 days. The financial cycle will then be (30 + 45 – 24) = 51. That is, the company must maintain a working capital equivalent to 51 days of operation.


Tips for small business financial control and organization software

Tips for small business financial control and organization software

Doing all the financial organization work manually can end up making things very difficult. That’s why there are already specific softwares that help companies control their accounts in a practical and simple way. Let’s list below some examples of programs that are succeeding among small and medium businesses.

Blue bill


The Blue Account is probably the largest financial management software for small businesses in Brazil. The system runs online and is paid via monthly subscription. Among its functions are the automatic control of accounts payable, issue of tickets and various reports.



QuikBooks has the same purposes as the Blue Account, but also has some more advanced options and more complete reports. The user can choose between a simpler and cheaper version and other more complex and also more expensive.



Granatum is one of the most customizable systems in the market, since it offers several modules in a single way. Thus, one can buy the financial control, of stocks, of clients, etc.




Xero is quite simple and easy to handle, but the lack of a nationalized version makes life difficult for Brazilian users.


MarketUP is a management and sales system totally free for micro and small entrepreneurs. With several functionalities, this software allows the issuance of fiscal documents, offline POS, reports, control of accounts payable and receivable and much more.


Indicators to keep an eye on

Indicators to keep an eye on

In addition to the cyclical indicators we mentioned (PME, PMR, PMP), the entrepreneur should also keep an eye on some other very important ones:

Current liquidity ( current assets / current liabilities) – current liquidity measures the degree of coverage of operating liabilities for the company’s short-term assets.

General Indebtedness (Asset / Liability) – General indebtedness measures the level of risk of the company and its ability to honor its debts as a whole.

Immediate liquidity (cash / current liabilities) – measures the company’s ability to respond to emergencies by having enough money to settle short-term accounts

There are a multitude of other indicators to evaluate. But if these we quote are well managed, the company will probably be in good condition.

Monitor delinquency


Another very important factor for the financial organization of the company is the control of delinquency . It’s no use having a good deadline policy if customers do not pay on the combined date. Therefore, an acceptable level of default should be maintained. If the default reaches the tolerable limit, the supply of credit to doubtful customers should be interrupted.

The general default indicator is obtained by dividing receivables in arrears by the total of accounts receivable (receivables in arrears / accounts receivable). The result is given in percentage terms.

The importance of reconciling payment dates


Another important tip for good financial organization is the alignment of payment dates. Often, there is no need for a negotiation effort to align the payment dates of the accounts with the deadlines for receiving customers. If the payment dates are synchronized with the payment dates, the company will reduce its need for working capital.

Conduct bank reconciliation regularly


The financial statements tell us almost everything we need to know, but their fidelity is only proven by bank reconciliation. Bank reconciliation is the act of validating the records of the statements through bank statements and company cash. Cases of divergence between company statements and bank details are not uncommon.

Often this can be caused by unknown fees, unregistered expenses and other unplanned accounts. Responsible companies conduct bank reconciliation at least once a month. This is essential for the smooth running of the business.

Beware of expensive credit

Beware of expensive credit

Many companies manage their working capital through bank lines of credit . Short-term categories generally do not provide interest rates, in addition to disposing of the firm’s receivables. Therefore, having a simplified credit modality such as those of Biz Capital is a must. In this type of modality, one can contract credit at interesting rates and without many complications, raising the company’s competitiveness.

It is important that the financial organization is done on the basis of indicators, and recorded simply and objectively. With these tips, your company will hardly go into insolvency and have long years of solid profits.



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