Taking Control of Business

controls of an aeroplane_internal controls for finance director

Control dashboard

How much control do you have over your finance systems and cashflow – really? You might think you’ve got a pretty tight grip on things, but if you haven’t put the right set of formal internal controls in place you could be at risk of running out of cash, running into issues with bad debtors, or even worse, of falling prey to petty fraud. At best, without robust controls in place to track sales, costs, expenses and cash flow, you’ll be running your business without access to the accurate management information necessary to take the right strategic decisions for the future success of your business.

Establishing, and then monitoring the key internal controls in your business falls under the remit of a Finance Director. But fortunately for small businesses, you don’t need to have a full time FD on board to have good internal controls in place. A  part-time FD can do the job just as well.

Why does my business need these controls?

Simply put – so that you don’t have to keep it all in your head. Having clear systems and procedures in place will relieve you of the need to remember it all yourself. It gives others a clear framework to carry out the necessary tasks, and frees you up to get on with running and growing your business.

Internal controls can also help to reduce the level of risk in your business. For example, the risk that your cash might run out unexpectedly because you haven’t monitored your cash flow, the risk of bad debt because you don’t have credit check processes in place for new customers, or paying more than you need to for materials or equipment because you don’t have good oversight of their costs or usage levels.

So it makes sense to implement good controls to ensure your reporting is accurate, that your business complies with all the relevant rules and regulations, and that it will achieve its business objectives.

How can we introduce internal controls in the business?

Your Financial Director will first want to identify the processes and procedures that need to be more carefully controlled, and the KPIs that relate to these, then, in consultation with others in the business s/he will create systems to oversee and manage these procedures.

As part of the process, your FD will also establish robust processes to create accurate monthly management accounts. These will give you clear oversight of how well the controls are working, along with the information you need to inform your long term business planning and strategic decision-making.

The systems and processes that are likely to form the internal controls for your business include:

  • spending controls (authorisations etc)
  • credit control procedures (including credit checks for new customers and invoice chasing)
  • cash flow forecasting and tracking
  • budgeting and forecasting
  • stock and equipment reviews
  • Intellectual property management, and more.

It’s not a quick or easy task to establish and then implement a robust system of internal controls. It can take several months to implement, and there are no shortcuts. Once the controls are in place the whole system needs to be monitored to ensure all elements are working in the intended way, and refined if that’s not the case. This is why it’s absolutely essential to enlist the skills of an experienced Finance Director for the task; an internal control system that isn’t working well is even less helpful than having on system in place at all, because it provides a false sense of security.

Every one of our team of highly experienced part time Finance Directors has implemented, overseen and/or overhauled numerous internal control systems and is perfectly placed to establish a strong system in your business to deliver the control and insights your business needs to succeed and grow.

Get in touch now to find out more, or read more here about how a part time FD can help your business.