Financial controls are the protocols an organisation puts in place to ensure its financial resources are being used efficiently and responsibly.
As we explored in our previous article, good financial governance has a fundamental role to play in the stability and success of any business. Financial controls provide organisation-wide oversight to ensure a business operates within its means and maintains a steady course towards its strategic objectives. They also guard against various finance-related risk factors, ranging from cash flow problems to compliance issues to fraud and theft.
We also set out the case for why outsourcing financial controls to a third-party specialist maximises the benefits and protections, by accessing high calibre expertise, freeing up internal resources and providing greater flexibility over how you administer your organisation’s financial controls, which can also lead to cost savings.
But how do you get started implementing a robust set of protocols for financial controls?
You can’t plan a route anywhere if you don’t know your present location. If we extend the ‘journey’ analogy to implementing financial controls, the first step has to be gaining a clear picture of where you are at present – what your financial and operational processes look like, what their strengths and weaknesses are from a governance perspective, what risks and opportunities they present etc.
This is also another strong argument for outsourcing. Financial auditing is a specialist field. Many financial audits have to be carried out according to strict criteria to meet legal and regulatory requirements.
That’s not the case if you are carrying out an internal audit with a view to overhauling your financial control regime. But that level of rigour is an asset, providing the depth and range of insight which will ensure you are developing a financial control strategy in full possession of the facts.
Some of the things a partner with a proven track record in financial auditing will be able to help you understand include:
- How your current processes match up to established benchmarks for financial controls.
- Where there might be gaps or anomalies in your financial reporting which need resolving if you are to gain full oversight.
- How current financial policies stand up to a variety of different operational scenarios, and where there might be vulnerabilities.
- How robust current business strategy and operations are, including things like cash flow, asset management and investment strategy, again tested against different possible future scenarios.
- What material benefits suggested changes to your financial control regime could bring.
Another important point is that implementing financial controls cannot be seen as a one-and-done exercise. Businesses are living, breathing, dynamic entities, the contexts in which they operate change all the time, and therefore so do the priorities that determine and shape financial governance.
Part of getting started with putting financial controls in place should therefore include agreeing to a regular reporting and review structure to ensure that the controls themselves remain fit for purpose and in line with the best interests of the business.