Sound financial governance plays a key role in achieving long-term success in business. Having the right controls and protocols in place covering how money is managed, spent and accounted for goes a long way to mitigating risks, as well as providing the kind of clear whole-organisation insight that improves decision-making.
Some people argue that financial control is an area businesses should take care of themselves – a case of keeping your own house in order. But there is much to be gained from looking to outsource to a specialist financial controller with specific expertise and skills related to financial governance.
With a fresh pair of professional eyes looking in from the outside, third-party specialists can often spot gaps or weaknesses in financial processes that weren’t previously identified, or see opportunities to deliver efficiency gains and better value. They can use their experience and knowledge to further reduce exposure to risk, all while freeing up people in your own financial team to focus on day-to-day operations.
In many ways, bringing in an external financial controller is like so many examples of consultancy work – the specialist is not brought in to do the work for you, but to advise on clarifying and improving strategy.
Here are five areas where the expertise of a financial control specialist can benefit your business.
A key part of implementing financial controls successfully is ensuring that everyone across an organisation is handling finances consistently. You might say you want them singing from the same hymn sheet – or signing the same documentation. Standardised documentation makes it easier for everyone to follow the same processes, and also makes tracking financial activity easier.
Another facet of financial governance is ensuring that robust measures are in place controlling who has access to the company’s financial resources (including data), and how use of those resources is authorised and approved. Lax measures can leave businesses exposed to errors and repetitions in things like credit control. Or more seriously, make them vulnerable to theft and fraud. Professional financial control specialists have expertise in these important security matters.
Another important security principle in sound financial management is ensuring that a small number of people do not have too much control over financial matters. Separation of duties is the financial equivalent of installing fire doors – if it turns out you have one bad apple in the organisation, it stops the fire spreading. Outsourcing to a third party automatically introduces some of that separation.
In our previous post, we discussed how the starting point for implementing robust financial controls was auditing current processes and identifying where improvements could be made. Professionals with a background in carrying out financial audits to a statutory standard are the ideal choice for undertaking this process. But auditing helps with maintaining financial controls at any time. You might, for example, want to undertake periodic audits of tangible assets to check if anything is missing or unaccounted for.
Finally, one of the oldest principles in accountancy is the idea of double-entry bookkeeping, which ‘doubles up’ on the recording of transactions by accounting for them as both credits and debits. This in itself is an important financial control, as any discrepancies between the two sides show that something is amiss and needs to be investigated. In that sense, any accountant you hire plays a role in your financial control protocols.
Should discrepancies be spotted, it may be necessary to bring in someone with expertise in forensic accounting to get to the bottom of what is happening. If you already work with a financial control expert, they are likely to already have these skills – and are likely to spot anomalies in your accounts more quickly.
As an extension of this, it’s also advisable to carry out more in-depth periodic ‘reconciliations’, or going through all accounting records with a view to identifying anomalies and then trying to account for them.