Every organization, regardless of its size and scope of activity, needs a well-structured system for quality financial management. In addition to sound decision making, business growth analysis, a proper understanding of market dynamics and trends, it also becomes a valuable tool to determine the future course of action for a business.
Whether it’s cash disbursement, record-keeping, or diversification of business plans, the likelihood of errors (even fraud) occurring is always a strong possibility in any business. As such, companies not only recognize the importance of strategic financial management in their companies but are increasingly collaborating with outsourcing partners for achieving better results.
While, outsourcing does offer excellent support to your business, understanding the following 5 financial control processes will provide valuable support for assessing your organization’s financial strengths, weaknesses and operational policies while also strengthening your internal control, and maintaining accountability and credibility as a firm.
This is a significant tool for good internal control and risk mitigation for organizations of all sizes. An audit trail provides a comprehensive, accurate and chronological record of operational activities and events to better assess your financial position and performance as a business. Well-defined audit trails help connect the dots, thus making it easier to ensure compliance, eliminate fraud, and in maintaining your business’s integrity and credibility.
After evaluation, the audit trail report brings together various information to present background information, observations and verified opinions, and outlines the necessary action for making any amends to the company’s financial statements. All reports are prepared by the generally accepted auditing standards (GAAS) to ensure accuracy, consistency and verifiability of the audit process and report.
Balancing of Input to Output
Changes and disruptions in market statistics can seriously impact business performance. Because the demand-supply balance is a fragile one, it helps when a business adopts the practice of preliminary input-output balancing evaluation. Not only does it guide many of their long term financial decisions, but it also leads to better management of resources, productivity and optimizes performance through proper sales and operation planning.
Tracing Transactions from Journal Entry to Financial System Reporting
Another important financial control practice for any organization, the accounting cycle ensures all financial transactions are properly recorded, updated and accurately audited. From journal entries to preparing trial balances to making any adjustments in the accounting journals, every business transaction (from invoices to purchases to even canceled orders) is duly noted in a structured and chronological manner, and the information is consolidated to prepare the financial statement at the end of a particular reporting period. Reviewing your records from source document to final report helps assess your organization’s financial standing accordingly plan for future purposes.
Security – Internet Fraud Concerns
In an age of increasing tech-based functioning, fraud and financial crimes are a serious concern for all industries. Because this domain of cybercrime is deeply interrelated to other aspects of digital growth, adopting a more integrated and collaborative model for prediction and prevention of such security risks is an utmost necessity for all businesses. From simple practices like account authentication, verification of customer/employee/vendor, weekly log monitoring, reviews of transactions, bank reconciliations and regular audits to more stringent measures like implementing stronger policies and procedures, strengthening your analytic tools and software programs to effective partnering with reliable financial services institutions, make sure you consolidate your operational model around a more comprehensive and structured program for better and real-time risk assessment and fraud prevention.
Need Unique Accountability for Transactions
Accountability for all business transactions is integral for maintaining financial accuracy and integrity in any business. A responsible business practice that ensures the information a company shares with investors, stakeholders, and the public as well as internally is accurate and credible. Accountability further enables business in developing transparency for a more robust operational process and to mitigate risks.
Good financial control is important for successfully running any business. From strengthening internal control processes to stronger risk assessment to keeping you updated on all aspects of your business operations, it is the backbone that supports informed decision making, strengthens financial management and contributes to larger growth of the organization.
From knowing your risks to better planning, if you wish to know more about financial management practices suitable for your business, drop us a message here.