{"id":4230,"date":"2023-06-21T17:51:55","date_gmt":"2023-06-21T20:51:55","guid":{"rendered":"https:\/\/smarthis.com\/?p=4230"},"modified":"2023-06-22T12:18:27","modified_gmt":"2023-06-22T15:18:27","slug":"risk-reduction-heres-how-to-eliminate-errors-from-your-finance-department","status":"publish","type":"post","link":"https:\/\/smarthis.com\/en\/risk-reduction-heres-how-to-eliminate-errors-from-your-finance-department\/","title":{"rendered":"Risk reduction: Here’s how to eliminate errors from your finance department"},"content":{"rendered":"

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The finance department is one of the most important of any company, as it is responsible for controlling expenses and revenues, ensuring fiscal and tax compliance, planning the budget and investing strategically.<\/span>\u00a0<\/span><\/p>\n

However, this sector is also subject to several risks that can compromise the performance and profitability of the business. Therefore, to avoid or minimize them, it is essential to adopt efficient and proactive risk reduction strategies, based on methods and tools that allow you to identify, analyze and control threats.<\/span>\u00a0<\/span><\/p>\n

In this article, we will show you how you can eliminate or reduce errors in financial management through smart digital solutions. Interested? So, continue reading and learn more!<\/span>\u00a0<\/span><\/p>\n

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5 Mistakes You Should Avoid in Financial Management<\/span><\/span>\u00a0<\/span><\/strong><\/h2>\n

Bureaucratic processes are part of the operations of any enterprise. However, the financial department is one of the ones that most accumulates tasks of this profile, with a high amount of repetitive manual activities, such as filling out spreadsheets, controlling collections<\/span> , paying taxes, <\/span><\/a>drafting contracts, etc.\u00a0<\/span>\u00a0<\/span><\/p>\n

Although they are crucial activities to the sector, this does not mean that they cannot be optimized to maintain the productivity and financial health of the business. Check out the most common mistakes that can harm the development of your company.<\/span>\u00a0<\/span><\/p>\n

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  1. Manual management<\/strong><\/li>\n<\/ol>\n

    Doing the financial management manually is a mistake that can generate major problems for the company, such as:<\/span>\u00a0<\/span><\/p>\n

    Inefficiency:<\/strong> Manual processing of tasks such as data entry, calculations, bank reconciliation, and report generation is time-consuming and effort-consuming. This can lead to errors and delays, harming the operational efficiency of the finance department and the company as a whole;\u202f<\/span>\u00a0<\/span><\/p>\n

    Lack of scalability:<\/strong> As the company grows, the manual management of financial processes becomes more complex and time-consuming. Transaction volumes increase, making it difficult to track and process all information efficiently. This can limit the company’s ability to handle growth and can lead to bottlenecks in financial processes.\u202f<\/span>\u00a0<\/span><\/p>\n

    Increased likelihood of errors:<\/strong> Manual processing is subject to human error, such as mistyping numbers, miscalculations, or missing important information. These errors can lead to inconsistencies in financial records, inaccurate reporting, and incorrect decision making.\u202f<\/span>\u00a0<\/span><\/p>\n

    Difficulty in data analysis:<\/strong> With manual management, it is more difficult to perform detailed analysis and gain valuable insights from financial data. It also makes it difficult to obtain up-to-date and relevant financial information to support strategic decision-making.\u202f\u202f<\/span>\u00a0<\/span><\/p>\n

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    1. Carelessness in fiscal and legal obligations<\/strong><\/li>\n<\/ol>\n

      Negligence in fiscal and legal obligations can result in financial penalties and legal problems for the company. This includes paying taxes within established deadlines, preparing and submitting required financial reports, and complying with tax and labor regulations.<\/span>\u00a0<\/span><\/p>\n

      In addition to damaging the company’s reputation with customers, suppliers and investors. The company’s image is affected when it is perceived as dishonest or irresponsible towards laws and regulations. This can lead to loss of business, partnership difficulties, and difficulty attracting investment.<\/span>\u00a0<\/span><\/p>\n

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      1. Mismanagement of credit and collections<\/strong><\/li>\n<\/ol>\n

        If the finance department does not establish adequate credit policies and does not monitor customer payments closely, this can negatively affect the financial health of the company and result in:<\/span>\u00a0<\/span><\/p>\n

        Impact on liquidity:<\/strong> Poor credit management can lead to cash flow problems, as payments owed by customers are not received on time. This can result in a lack of working capital and difficulty paying suppliers, salaries, and other financial obligations. Lack of liquidity may adversely affect the company’s ability to operate and invest in growth;\u202f<\/span>\u00a0<\/span><\/p>\n

        Risk of delinquency:<\/strong> Poor credit management increases the risk of delinquency, that is, customers who do not pay their debts. This can occur when the company grants credit to customers with a bad payment history or does not perform a proper credit analysis. Delinquency directly affects revenue and can lead to significant financial losses;\u202f<\/span>\u00a0<\/span><\/p>\n

        Collection costs:<\/strong> When the company does not have an efficient collection system, it can spend significant time and resources on recovering late payments. The team needs to take the time to contact customers, send reminders, and handle billing processes. These additional costs affect the efficiency and profitability of the company;\u202f<\/span>\u00a0<\/span><\/p>\n

        Reputational damage:<\/strong> Poor credit management can damage a company’s reputation. If customers perceive that the company does not collect their payments properly, it can negatively affect the trust and image of the company. This can lead to the loss of customers and difficulty in winning new business.\u202f\u202f<\/span>\u00a0<\/span><\/p>\n

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        1. Lack of monitoring and financial analysis<\/strong><\/li>\n<\/ol>\n

          Lack of regular monitoring and financial analysis can lead to a lack of visibility into the company’s financial health. It is essential to track important financial indicators such as profit margin, product or service profitability and rate of return on investment.<\/span>\u00a0<\/span><\/p>\n

          Without this information, the company may continue to operate inefficiently or fail to identify growth opportunities.<\/span>\u00a0<\/span><\/p>\n

          Lack of financial visibility:<\/strong> The absence of monitoring and financial analysis prevents the company from having a clear view of its financial situation. This makes it difficult to identify problem areas such as overspending, operational inefficiencies, or financial losses. Without proper monitoring, the company may miss opportunities for improvement and correction of financial problems;\u202f<\/span>\u00a0<\/span><\/p>\n

          Impaired decision-making:<\/strong> The lack of up-to-date and accurate financial information affects decision-making negatively. Without proper analysis, the company can base its decisions on assumptions, intuitions, or inaccurate information. This increases the risk of making bad financial decisions, such as unnecessary investments, improper acquisitions, or misguided pricing strategies.\u202f<\/span>\u00a0<\/span><\/p>\n

          Difficulty in planning and anticipating problems:<\/strong> Monitoring and financial analysis allow the company to plan effectively and anticipate potential problems. By tracking key financial performance indicators, the company can identify trends, predict future scenarios, and implement corrective measures in advance. Without this monitoring, the company may be unprepared to face financial challenges such as market fluctuations, liquidity problems or lack of profitability;\u202f<\/span>\u00a0<\/span><\/p>\n

          Loss of opportunities:<\/strong> Lack of monitoring and financial analysis can also lead to missed opportunities for growth and maximization of profits. By not identifying investment opportunities properly, cost optimization or improving financial processes, the company may lose its competitive advantage and not reach the full potential of its financial resources.\u202f\u202f<\/span>\u00a0<\/span><\/p>\n

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          1. Lack of adjustment in contracts<\/strong><\/li>\n<\/ol>\n

            Not readjusting contracts according to inflation, operational costs and market value is another common mistake. This can generate losses and loss of competitiveness for your business.<\/span>\u00a0<\/span><\/p>\n

            Loss of revenue:<\/strong> When contracts are not readjusted periodically, the company may be missing out on opportunities to increase the value of the services or products offered. This means that the company may be failing to charge fair value for its products or services, resulting in a loss of potential revenue;\u202f<\/span>\u00a0<\/span><\/p>\n

            Not taking advantage of the full potential of customers:<\/strong> The lack of upsell, which is the offer of more complete products or services to existing customers, prevents the company from taking advantage of the full potential of its customers. If the company doesn’t offer additional options to customers who are already satisfied with its products or services, it’s failing to increase revenue and customer loyalty.\u202f<\/span>\u00a0<\/span><\/p>\n

            Difficulty keeping up with the market:<\/strong> The market and economic conditions are always changing. If contracts are not readjusted according to these changes, the company may be stuck with outdated conditions, such as prices or terms that are no longer competitive. This can result in the loss of customers to competitors who offer more advantageous terms.\u202f\u202f<\/span>\u00a0<\/span><\/p>\n

            Learn how to choose the best solution for your needs<\/span>\u00a0<\/span><\/p>\n

            If the company faces any of the challenges mentioned above, the incorporation of new technologies and digital solutions can be the key to<\/span> adapt to market changes<\/span><\/a> and remaining relevant. So, to solve these mistakes and make the business competitive, it is interesting to have some digital solutions:\u00a0<\/span>\u00a0<\/span><\/p>\n

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            RPA\u00a0<\/span>\u00a0<\/span><\/h2>\n

            Robotic Process Automation (RPA)<\/span><\/a> enables repetitive tasks performed by people on computers to be automated through software.\u202f\u202f<\/span>\u00a0<\/span><\/p>\n

            With process automation solutions you can automatically carry out the recurring demands of your company\u2019s accounting, avoiding errors in financial management or carelessness in the company’s fiscal and legal obligations, which generates fines, loss of documents and unpaid or duplicate payments.<\/span>\u00a0<\/span><\/p>\n

            This makes your company more efficient, in addition to optimizing the process of managing certificates, notes, guides and deadlines, avoiding the suspension of activities and interdictions from the city hall. In short, the benefits involve:<\/span>\u00a0<\/span><\/p>\n