This is major point in any business.
You need to know what is coming in but you also need to know what is going out.
Going out, DISBURSEMENTS, breaks down into what is needed and what is wanted.
Disbursements need to be controlled more than anything else.
This determines whether a company will expand and break down and disappear.
What one needs to keep track of is Debit Orders, The amount of money coming in, what must be purchased for production to take place, and only after that can it be looked at what can be purchased to expand production.
That is how it works :
- Have money to Keep the Creditors happy
- Purchase things that directly relate to production
- Purchase things that will expand production
When it comes to Disbursements however, one can feel obliged to continuously buy things and pay for things and sign things off.
This is an incorrect viewpoint.
The correct viewpoint to have is more like :
Is it necessary to buy that? Yes or No.
Someone in charge of Disbursements is in charge of making life or death decisions for the company or themselves.
A major part of Disbursements is actually quite the reverse of what the title indicates. Save!
Having money in a pool ready to cushion any moment have major need of Disbursement is a good position for anyone to be in.
Example : An employee sues the company and all the money of the company has been paid to pens and toilet paper.
The employee wins the suit and has to be paid out 1.2 million. There has been no pool generated to provide for such an occurrence.
For this reason Auditors, Accountants, Financial Managers, Financial Planners, Etc. is what is needed to track the logistics of your wherewithal.