Content We Love — The Importance of Financial Controls
When companies are focused on growth and brand expansion, it is all too easy to lose track of risk assessment protocols and financial controls. In the case of one UK-based business, their leadership struggled to maintain visibility into their finance & accounting (F&A) team’s work. Detailed in an AccountancyAge article, the organization’s struggles may lead to an opportunity for financial collaboration.
The Financial Risks of a Growing Company
When companies grow, they add more people, functions and processes—including in the office of finance. If a company does not establish a system of controls at the beginning, they increase the likelihood of financial risk when they scale. Essentially, F&A outputs quickly become so complex and multi-layered that they complicate the organization’s ability to mitigate financial risk. To proactively prevent these issues , the office of finance must implement strong financial controls by automating their Record to Report process.
In order to encourage easy visibility between the team that manages the numbers and the team that manages the business, the following conditions should be satisfied:
- Establish a strong system of controls
- Verify access is given to proper users
- Maintain data security
- Manage reports within deadlines
- Create opportunities for insight-driven decisions
Unfortunately, this UK company did not have a financial foundation built on these conditions. According to Simon Bittlestone, CEO of Metapraxis, “The fact is that if those not implicated…had effective management information that allowed them to cut through the noise,” he says, “they would have spotted such colossal mistakes far earlier.”
How to Protect Your Growing Company
While this organization’s situation is lamentable, it is also a teachable moment. As Bittlestone says, “To avoid making the same mistakes, companies need to promote a greater collaboration between financial and management accounting.’” The first step in building collaboration is to assess your risk areas in the financial process. Both departments need to be aware of their own shortcomings before partnering up to grow the business.
The Importance of Financial Controls
Overall, growth is a positive sign for a business, but it must be tempered by strong financial controls that provide reliability, financial compliance, clear visibility and detailed insight into your office of finance’s financial close. A small error can easily compound into a business-halting catastrophe if left unchecked by management or process oversight. And at the end of the day, the office of finance must be able to provide reliable financial statements, free of errors.
To learn more, click on the banner below to discover how strong financial controls can decrease your financial risk.
To read the Accountancy Age article in full, please click here.
Written by: Chelsea Downey