Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 20 – I have appropriate internal financial controls for my business
Who controls the money in your business?
Is this something that you do yourself; or have you delegated it to a team member?
One of the easiest activity to delegate is the financials! You just pass a shoebox with all the receipts/invoices/bank statements to your accountant and/or bookkeeper. The danger is that they will know more about your business than you do. For an example of what can happen if you abdicate responsibility rather than properly delegate, i recommend reading the ‘Emyth Revisited’ by Michael Gerber.
As with any business activity, it is best practice to have a financial control process and rules in place. This may seem common sense, but as we all know, this is sometimes in short supply. Especially when you are busy managing team and customers. Money can often become a contentious issue within a company; so it pays to make sure that all dealings are totally transparent within your books.
If you have a bookkeeper, how do you know they are competent and trustworthy? Do you have controls in place for who can sign for what – and spend limits?
If you operate with cash, do you have a secure system to make sure all of it gets into the till for all sales, and that it always tallies up at the end of the day? Do you have a safe place to hold cash? When you take your takings to the bank, is it in a secure way?
It is important to have a financial system for invoicing and paying bills, late payment to suppliers can damage your credit rating. Late payment by your customers can cause cashflow issues and create an image that they can pay late (or never) because you don’t seem to care.
Do you provide clients with a credit line? How do you decide the terms? If you delegate this task, you need to have robust rules in place, and regularly review that the customer is operating within the terms of the agreement.
To understand the worth of your business at any particular time, do you record the value of Work In Progress (WIP)? What about your stock holdings?
The ‘How to ‘bit:
for this blog, the ‘How to’ is in the form of a list of examples that could be incorporated into your financial management system to help put the necessary controls in place.
- Control of the financial control person/bookkeeper
- Control over who can sign for what, and how much
- A secure place to hold cash
- A robust accounting system
- -A payment strategy
- An income chasing strategy
- Regular reviews of where the money goes… are the bills/invoices correct and being paid correctly
- Compliance to legal and financial laws and regulations – companies act (check)
- Regular internal financial reporting and checking on regulations (such as Making Tax Digital)
- Financial audits – do them internally, even if your business is exempt from audit.
- Understanding of how much your stock is worth – e.g. basic materials vs WIP
- Cover for whoever is the financial controller if they’re not available
- Policies & procedures – as part of the QMS
- A reputable accountant – boring and dependable or ‘creative’ and/or Bookkeeper
- Proper background checks on whoever handles the money
- Know where your money is
- Secure way of holding financial access/passwords/codes
- Robust checking for any credit given – based on sensible/realistic rules
- Robust goods inwards/signing for anything, rules/process
- Rules for dealing with non GBP money
- Rules for late payments – charges scale
- Control of what team can spend – i.e. mobile phone usage and expenses rules
- Stock control (with value)
This is not an exhaustive list, if you would like help setting up your own financial control system, follow this link and Contact Us…