Financial controls are vital policies and procedures put in place to keep financial records in check and protect company assets. Yet the vast majority of businesses don’t have strong controls in place, according to our latest research.

Three in four businesses don’t have the right financial controls in place to protect their business; only one-quarter (25%) of businesses report having strong financial controls in place, the research shows.

How can businesses of all sizes build better financial controls, especially with the help of their accountants and bookkeepers? We consulted our ApprovalMax experts to learn more:

Angela Bierman, Head of Financial Controls North America, ApprovalMax

Why is it so important for businesses of all sizes to have strong financial controls?

Strong financial controls are the guardrails of good decision-making in any business. A lot of smaller companies may hear the term ‘financial controls’ and think ‘that’s not for me, my company isn’t big enough.  But no matter the size, every business has something to protect and no one wants to lose money to fraud or carelessness.

How can accountants help their clients to build and maintain these strong controls?

As trusted advisors, accountants not only provide services but valuable education. Many small business accountants can help clients design, monitor, and adjust financial controls as circumstances change and their business evolves. It doesn’t have to be a huge project to deliver a full playbook of financial policies and procedures – simply asking questions like ‘How are you protecting your business from phishing emails?’ can highlight potential risks.

How can bookkeepers help their clients to build and maintain these strong controls?

By working closely with clients, bookkeepers can identify the types of controls clients may need to put in place and where they can help. We can also help them set up the workflows around these controls and monitor them as needed.

Are there any specific requirements or guidelines around financial controls in North America, where you’re based?

Across North America, guidelines around financial controls vary. Companies operating in the US capital markets are subject to the Sarbanes Oxley Act (SOX) and all companies listed in Canada are subject to Bill 198 (unofficially “C-SOX”).

Where do businesses  – especially smaller ones – often misstep when it comes to controls?

Some small businesses misstep when it comes to financial controls by simply copying the financial controls of another company without assessing what will work for them, or where their own areas of risk are.

If you find your team is always processing exceptions to the guidelines, they weren’t customized enough for your unique ways of operating – or you’ve outgrown them!

Cassandra Scott, Head of Bookkeeping APAC, ApprovalMax

How do you define financial controls?

Financial controls are mechanisms that govern financial management within a business. They’re checks and balances put in place to ensure there is integrity around a businesses’ financial data, processes, and output.

Why is it important for businesses of all sizes to have strong financial controls?

Ensuring that you have Integrity around your financial information is critical, particularly if you're needing to provide that to other stakeholders or selling a business. For example, are you buying a business, seeking financing, or do you have Australian Taxation Office or other legal compliance obligations? It even extends further out to things like marriage breakdowns.

Financial controls are also vital for fraud mitigation. In businesses there can be a fine line between success and failure; you want to protect the financial resources of that business from any misappropriation or mishandling, whether intentional or not.

How can bookkeepers support their clients to build and maintain these controls?

As bookkeepers, we're very deeply embedded in the day-to-day mechanics of business operations and that gives us unique insights into workflows, processes, and procedures. Through this, we have the ability to spot where there are weaknesses or flaws in those processes, as well as the capacity to work with business owners to try and fix those gaps.

When is the best time to set up financial controls?

While the new financial year is always a good refresh, there’s nothing that stops people from fixing their financial controls immediately! If you wait and try to make everything perfect before starting, there’s always the risk that you’ll get distracted and never get it done.

Stuart Hurst, Head of Accounting EMEA, ApprovalMax

How do you define financial controls?

They are ultimately controls that safeguard cash, whether this is directly in terms of peoples bank access or more indirectly, such as approval processes for purchase orders.

Why is it so important for businesses of all sizes to have strong financial controls?

Financial controls serve several purposes. They help stop worst case scenarios, whether that be because of fraud or simply poor spending decisions.

Financial controls also help maximise the use of your money. You’d be amazed how much money can be wasted without the right controls in place. A prime example is on subscriptions set up that are never used but not cancelled.

How can accountants help their clients to build and maintain these strong controls?

Accountants are in a prime position to help build controls. They have a great grasp of finances so can help develop processes around purchases and sales as a starting point.

Accountants can also play the enforcer role in a firm, making sure processes are followed, which some business owners may feel uncomfortable with.

Where do businesses  – especially smaller ones – often misstep when it comes to controls?

They probably put too much trust in people over processes to be honest and they often move so quickly that controls get neglected. In the worst case, this puts you at risk financially.

It also means so much more time needs to be spent building controls down the line which can be messy the more people are involved. It’s much easier to build solid foundations from day one!

Are there any examples, like with your own clients, where you’ve seen first-hand the benefits of stronger controls?

We saved a client over £10k over a six month period by bringing in a robust purchase order system. Previously he was paying for stuff that never arrived!

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