~ by Nehal S
Executive Summary
The “Establishment of Controls” features in almost every job description of a Chief Financial Officer (CFO). This article delves into what controls are and how your CFO can work with departments across the organization to create checks and balances to ensure that fraud can be caught (if and when it occurs) as well as to make cash use more efficient.
What are Controls?
Controls are any tools and mechanisms that capture critical data which can be used to compare/benchmark against other sets of data. The “control” is in the act of comparing these two sets of data. For example, if your bin card for a certain warehouse material shows “50 Units” as unsold, yet your accounting data shows that actually 60 units are unsold – there is some level of mismanagement or inaccurate recording happening. Having in place controls and a process of consistently checking and comparing data is what keeps companies running without waste and efficiently. Controls should be established by departments within themselves (ie. Procurement controls) but also across departments (Procurement / Accounting Controls, Sales / Manufacturing controls, etc.). Your CFO can help you come up with Financial Controls as well as Cross-Departmental controls which tie into aspects which directly affect the company’s bottom line.
Checks and Balances throughout your Company
Checks and balances are created by having and monitoring controls consistently. Controls can be monitored on a daily, weekly, bi-monthly, monthly, quarterly, semi-annually, or annually depending on how many resources it takes to monitor as well as the direct impact on the bottom line. Some controls related health and safety of employees and customers should be especially prioritized.
How Your CFO will Establish Controls
1) Create a list of required controls by department or product, if the company is organized by product.
2) Once these are created, he or she will also look for cross-departmental controls that make sense to implement.
3) The final list will be agreed with senior management and departmental heads.
4) The CFO will do an assessment of what controls already exist and strengthen them with forms, added processes, or even a system if needed.
5) The CFO will finally implement new controls from scratch and create processes and procedures to accompany them.
6) Each control will have an owner who will be trained on benchmarking and escalating when numbers don’t match.
7) The CFO will ultimately try to build a system whereby all numbers can be uploaded/added so that senior management can have a holistic view of the checks and balances themselves.
What if your Company Can’t Afford a Full-Time CFO?
Fractional CFO services are starting to gain traction around the continent, which offer hourly, daily, weekly, and monthly CFO rates. The CFO should be matched with your company based on industry experience.
If you are unable to afford a fractional-CFO, consider onboarding a fractional-finance manager. Some financial visibility is better than no visibility.
Work with Nehal S
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