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Financial controls to support your business

22 April 2020

Ensuring that financial controls are implemented and monitored will allow your leadership team to focus on the activities that underpin your business – the important tasks that sustain growth and profitability.  In the current climate enacting sound financial controls will inform your ability to make agile decisions that impact performance.

Monitoring performance

Do you have a detailed understanding of how your business is performing now? Keeping your reporting up-to-date will mean you are prepared to adjust costs and to communicate any adjustments in your decision-making too which will stand you in good stead for instances such as needing to negotiate with suppliers and/or lenders.

1.    Financial Records

To be able to monitor your business’ performance then bookkeeping activities must be undertaken constantly. This is your record of all financial transactions that are running through your business and their impact on the bottom line. Strong bookkeeping practices at this time extend beyond knowing the top-level numbers and into deciding on how spend and income are and should be classified and recorded. This information enables you to produce management accounts that will enable you to make decisions with confidence.

2.    Management Accounts

Even simple management accounts can be prepared from up to date bookkeeping.  Remember that the quality of management accounts is based on the precision of the underlying bookkeeping data. This is how you can spot any undesirable patters that are appearing. If you are time poor, then as a minimum, a basic summary of the income and expenditure for the period (monthly or quarterly) will give an idea of how the business is getting on.

3.    Create a budget – and review performance against that budget

Most businesses have a budget. The problem is that when distractions come into play that can affect your business– like peaks in workflow that enable growth or external unexpected events that require risk mitigation strategies, it’s easy to stop reviewing performance against that budget . Particularly in times that challenge performance and productivity, having a budget that can be reviewed for every branch of the organisation will enable you to make decisions across the operation.

Reviewing management accounts against budget will highlight where things are going well and where there are potential challenges. This insight will ensure you take corrective action to deal with problems before it is too late. This is why having a budget and regularly reforecasting based on actual and known future outcomes is so important. 

4.    Report on and review critical measures for your busines 

The current and future health of your business isn’t just revealed by conventional financial performance measures. What are the factors that make your business successful? These could be levels of website traffic, sales conversion data or helpdesk calls and issue resolution. These drivers may differ according to the challenges of the external environment. Work out what matters in your business right now, then capture that data and monitor it.

If your business would benefit from support on how to analyse the data you collect – you might want to consider the field of Data Science, which allows you to harness the power of data along with modern mathematical modelling techniques. It allows you to extract knowledge and provide useful, practical insights that will improve your bottom line. 
Doing things right

1.    Make use of the user permissions in your accounts’ software

Every accounting package allows restricted access user permissions designed to prevent people from doing things they shouldn’t do. Unfortunately, many businesses forget to activate them or fail to create and enforce controls properly. However, establishing user permissions is an easy control to set up and particularly powerful for preventing fraud and errors.  This is particularly true in more challenging operational contexts.

Posting manual journals is just one of many ways that frauds or mistakes are covered up. So if you restrict the access for posting manual journals to certain qualified people or even just the directors, you have a better chance of preventing fraud.

2.    Know your contracts and store them securely

As your business evolves, it is important to formalise relationships, including employment and leasing relationships and stay familiar with the terms of those relationships. Making sure contracts are understood will help you to make decisions in the context of reed terms and to flag any points that may need to be negotiated and adjusted as your business grows or the context you are working in changes.  .  This will protect both the business and provide clarity and clear communication for other stakeholders.

Ongoing support for your business

Every finance function has its own systems and processes.  Understanding how the finance function operates and those systems and processes that drive it will uncover any pain points that are affecting the performance of the function.  These pain points can be uncovered during more challenging times and such times present an opportunity to fix any issues you find.

Cloud-based technology enables teams to work seamlessly and remotely if need be. At BDO we work across a range of solutions with our clients and witness all sorts of improvements to productivity and efficiency.

If you are concerned about any key staff members being unable to complete their roles fully at this time, then we are here to help.  Our BDO Drive team provides partial and full outsourced back office finance and accounting services. We also provide FD level services to boards to support their decision making. 

We’re here to help so contact us to find out more.