How to Set Up Financial Controls for Your Business

Business owner checking reports on laptop

Once your business has a comprehensive bookkeeping system to keep accurate records, you can take your financial management to the next level by setting up financial controls.

Bookkeeping gives you the insight to understand where your money is going. Financial controls enable you to make sound decisions on how to spend money on an ongoing basis. And when you’re growing your business, financial controls will allow you to be strategic about your spending, maintain financial stability, prevent fraud, and ensure compliance.

Here’s how you can set up financial controls for your business and stay on track to reach your goals.

Why are financial controls necessary?

Financial controls create standardization for the financial aspects of your business. You’ll set up protocols for receiving customer payments, making payments to vendors, and documenting your transactions. Your controls will also guide you when you decide what costs to pay and what not to pay.

As your business grows, financial controls will keep you in line to reach your goals, stay compliant, and prepare for a tax audit.

Make sure you have the right bookkeeping software and budget in place

You won’t be able to establish sound financial controls for your business if you don’t have the right bookkeeping software, systems, and budget.

As part of your bookkeeping practices, make sure you keep all your vendors’ W-9s, contracts, and receipts in a secure, company-owned account, like a Google Drive. This way, they can be accessed by all responsible parties at any time. Bookkeeping software, like QuickBooks or Xero, allows you to upload these supporting documents to all transactions you enter in the books, which you’ll need to adhere to your financial controls.

Your budget sets goals for how much cash your business needs to retain for months and years ahead.
An important figure in your budget is your days payable, which is the average number of days your business takes to pay the bills it receives from its vendors. By controlling your days payable and setting financial goals, you can extend your cash flow and even out bumps caused by variations in sales.

Your budget and bookkeeping practices are the foundation for your financial controls. As your revenue grows, adhering to your financial controls will only become more complex if you don’t have the right systems to manage them.

How can you set up financial controls for your business? Follow these steps to get started.

1. Assign a financial controller for your business

A financial controller prepares financial reports for your business in addition to other financial responsibilities. Choose someone that has in-depth knowledge of your business operations, including your vendors and contractors, or someone with financial experience that can get up to speed quickly. The controller will know who needs to be paid immediately and who can be held off.

If your business is smaller, you could ask a current employee to take on controller duties on top of their regular tasks. For example, your operational manager, chef, or general manager could be assigned controller duties because they know what needs to be done to keep the business running. When your business scales beyond $1 million per year, you might hire someone to be exclusively the controller.

2. Establish rules for payments and deposits

For your financial controls to be successful, you’ll need to keep good records of your spending and income. That starts with clear rules for the money that goes in and out of your business.

All your transactions need to include several key pieces of information. For your income, make sure you have a sales receipt or a signed agreement between you and the buyer. Both should clearly detail what products or services are being sold.

This is easy if you’re using a point-of-sale (POS) system, which will gather this information for you. If you don’t use a POS system, make sure you have a valid contract or agreement for your sales with a date, the names of all parties, payment terms, and a description of the services or products being sold.

For your expenses, keep records of your bills from your vendors (including a completed Form W-9) or  receipts with the same information for small transactions. Take some time to establish standards for how you’ll pay your vendors, whether that’s by cash, check, or electronic payment. Many businesses make payments through an electronic funds transfer or automated clearing house (ACH) and use checks as a backup payment method.

You can ask your bank if they have a good bill payment platform that supports ACH, or you can use one of the many ACH bill payment software platforms on the market.

3. Set weekly payment procedures and periodic financial reviews

Set a weekly meeting with your controller and bookkeeper to coordinate your efforts to make the business’s regular payments.

You or your finance director will set guidelines for the controller and bookkeeper on how much to spend each week and allocations for various categories. Your bookkeeper will prepare an unpaid bills report, and the controller will assess the payments based on their knowledge of operations and vendor rules.

If the documents supporting these transactions are in place, the bookkeeper can make these payments via ACH through your online banking platform. Any other requested spending would need to be approved for the business credit card based on the overall budget set for your business.

Schedule periodic financial reviews to gauge the effectiveness of your financial controls and make improvements as needed.

Setting up financial controls will keep your business reaching higher

Taking your business to the next level means having the right systems, policies, and procedures to keep it growing and in compliance. Setting up financial controls is one piece of the puzzle to support your goals for the future.

As you’re getting your controls in place and putting them into practice, you can always turn to Pursuit for support. You’ll find access to affordable capital through our 15+ business loan programs, plus individualized support for your unique needs. Contact us today to learn more about how we can work together.

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