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Knock, knock. Before your eyes glaze over, let’s dive into a topic that many shy away from – financial controls in your business. Whether you’re an entrepreneur starting out or a seasoned business owner, understanding and implementing financial controls is essential for long-term success. In this article, we’ll break down the basics and shed light on why it matters.

What Are Financial Controls?

Financial controls encompass the processes, policies, and systems a business establishes to manage its financial operations effectively. These controls are like the safeguards that protect your business from financial mishaps and misconduct. Think of them as the seatbelt that ensures a smooth ride on your entrepreneurial journey.

The Segregation of Duties

One fundamental aspect of financial controls is the segregation of duties. This concept involves assigning different individuals to specific roles within your organization to prevent fraudulent activities and errors. Let’s illustrate this with a simple example.

Imagine you own a retail store. The employee responsible for closing the cash register at the end of the day shouldn’t be the same person handling the banking transactions. Likewise, the person handling banking transactions should not be responsible for entering financial data into your accounting system. This division of responsibilities creates a built-in system of checks and balances.

While this concept is ideal for large corporations with ample resources, it may seem impractical for small businesses. However, even in smaller organizations, you can take steps to ensure financial controls are in place.

The Role of Bookkeeping and Systems

Effective bookkeeping and robust financial systems are your allies in maintaining financial controls. You need a reliable way to track your sales, monitor your expenses, and plan your budget. This is where bookkeeping comes into play.

Accurate and up-to-date bookkeeping provides you with a clear picture of your financial health. It helps you identify potential issues and discrepancies early on. In essence, it’s your compass, guiding you through the financial maze.

The Two-Person Rule

Let’s delve into a real-world example of how financial controls work. Imagine you’re the treasurer of a mutual surf club. You can’t simply authorize payments and watch money flow out of the bank account unmonitored. Instead, your organization has a “two-person rule” in place.


According to this rule, any withdrawal or deposit requires approval from two individuals. In your case, as treasurer, you need the endorsement of either the President, Deputy President, or even the bar manager. This practice ensures that no one can siphon funds without oversight.

Applying Financial Controls in Small Businesses

In small businesses, implementing extensive financial controls may not always be feasible due to limited resources. However, as a business owner, you must have a basic understanding of your financial processes and vulnerabilities.

Identify the critical financial pain points in your business, trace the flow of money, and pinpoint areas where risks exist. Then, devise oversight mechanisms to ensure everything runs smoothly. This doesn’t mean you have to do it all yourself; you can delegate tasks or seek professional advice.

Consider having periodic check-ins with a bookkeeper or consulting with your accountant quarterly. These experts can help you analyse your financial figures, identify irregularities, and suggest necessary adjustments. It’s all about staying informed and proactive.

Financial controls might not be the most exciting topic, but they are undeniably crucial for the success and sustainability of your business. By implementing these controls, you can protect your business from financial mishaps, fraud, and errors. Remember, even in a small business, understanding your finances and putting oversight mechanisms in place is a wise investment in your future success. If you’re unsure where to start or have concerns, don’t hesitate to seek guidance from financial professionals. Your business’s financial health is worth it.

Discover the essential financial controls that every business should implement for success. Explore our comprehensive blog to gain valuable insights and guidance on these crucial safeguards. Start optimising your financial management today. Read it here!

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