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What’s this about?
Financial controls are policies and procedures designed to prevent or detect accounting errors and fraud.
What do I need to do?
Set up financial controls around payment approval, spending, reporting, budgeting, and reserves.
Contents
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Further reading
Templates
What are financial controls?
Financial controls are the policies, procedures, and other means by which your organization monitors and controls the direction, allocation, and usage of its financial resources.
Policies
The following policies offer important financial controls:
- Salary policy: A common framework from which all salaries and benefits are determined, and the schedule of their remittance to employees. Here’s a template policy.
- Oversight and authority policy: A set of guidelines and procedures that outline the framework for governance, decision-making, and accountability within your organization. Here’s a template policy.
- Expenses policy: A set of rules that define what the employees of a company can do with their employer's money. Here’s a template policy.
- Conflicts of interest policy: A set of rules for avoiding activities that are in conflict with the principles of organizational ethics and the interests of your organization. Here’s a template policy.
- Reserves and investment policy: A framework for managing financial reserves and investment activities, designed to ensure financial stability while mitigating risks. Here’s a template policy.
Procedures
Write essential finance procedures, including payment approval, spending, reporting, budgeting, and reserves.
These procedures can sit within related policies, or can be broken out into their own documents, depending on how your organization’s knowledge management system (KMS).
Best practice
Consider adopting the following standard practice procedures:
- Using credit cards instead of debit cards
- Double signing checks above a specified amount
- Separation of duties (e.g. separate people having responsibility for receiving funds and reconciling bank accounts)
- Forcing approvals (e.g. some wire transfer systems will have a way where two people look at each wire by default)
- Verifying wires via two communication methods (calling someone to confirm wire details)
- Regular backups of data
- Multi-factor for accessing bank accounts / transfer tools
- Third-party review
- Reducing time between authorization and processing
Also, consider engaging an accountant and a bookkeeper. While automation can save time, it’s still important to have someone overseeing the bookkeeping — and outsourcing this can keep you focused on your comparative advantage. Having a bookkeeper able to set up things like payments, with an appropriate review and approval process from management, is a way to reduce potential fraud and ensure financial controls are strong.
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