How Do You Ensure Compliance With Financial Controls?
In the complex world of financial compliance, we've gathered insights from top finance professionals to uncover effective strategies. From explaining the “why” in training to limiting authorized signers, here are five unique approaches shared by compliance managers and chief financial officers to ensure adherence to financial controls.
- Explain the 'Why' in Training
- Implement Robust Internal Audits
- Conduct Quarterly Internal Audits
- Limit Authorized Signers
- Regular Financial Rules Training
Explain the 'Why' in Training
To ensure compliance with financial controls, it is imperative in my process of initial training or a refresher to explain the “why” behind the process. Employees who are new to the industry—or if they don't interact with certain processes every day—may find it more difficult to learn, and I have found it to be a very effective teaching method. If you just say “do this” or “do that,” it is not as effective as one hopes it would be, and you end up spending more time fixing problems than focusing on what needs to be done.
Implement Robust Internal Audits
One effective approach I advocate for ensuring compliance with financial controls is the implementation of a robust internal audit system. This system involves regular and systematic reviews of financial transactions, compliance procedures, and control mechanisms within the organization. By having a dedicated internal audit team, we ensure that not only are all financial activities recorded and reported accurately, but also that they adhere strictly to the established internal controls and relevant external regulatory requirements.
The effectiveness of this approach is evident in its ability to proactively identify and mitigate risks of non-compliance and financial discrepancies before they escalate into more serious issues. For instance, regular audits help in detecting any unauthorized transactions or deviations from standard financial procedures early, allowing for immediate corrective actions. This not only protects the organization from potential fines and legal issues but also maintains the integrity of financial reporting and strengthens stakeholders' confidence.
Moreover, this proactive audit strategy fosters a culture of compliance and accountability across all levels of the organization, encouraging continuous improvement in our financial control processes. This systematic vigilance ensures that our financial operations remain transparent and in alignment with both internal policies and external legal standards.
Conduct Quarterly Internal Audits
One effective approach to ensuring compliance with financial controls is implementing regular internal audits. At SOBA New Jersey, we conduct quarterly internal audits to review our financial processes and controls. These audits help identify any discrepancies or weaknesses in our systems early on. By addressing issues promptly and refining our controls, we maintain high standards of compliance and accuracy. This proactive approach not only minimizes risk but also instills a culture of accountability and transparency within the organization, leading to more reliable financial management.
Limit Authorized Signers
In my experience, the evolving nature of financial systems, the rise of digital payments, and heightened cybersecurity risks are critical considerations for updating our financial controls. One effective approach I've implemented is limiting the number of authorized signers and lowering the thresholds for transactions. This strategy has become particularly relevant in smaller organizations where extensive oversight might be lacking. By restricting the authority to make payments to a select few, we prevent substantial sums from being withdrawn unexpectedly, which aids in better cash flow management. This measure has gained even more importance following the economic downturn triggered by the pandemic.
Moreover, adapting to a new control environment has been a significant shift. With more remote and dispersed work settings, the traditional centralized control model isn't as effective. Recognizing this, we've tightened our existing controls to address these changes. This method helps in managing risks and ensures that our team is prepared to operate safely in an unfamiliar environment. This proactive adaptation helps mitigate potential issues before they arise.
Regular Financial Rules Training
We have regular training sessions to remind everyone of the financial rules. These sessions teach us what’s new with the IRS rulebook and what needs to be remembered. They are effective because they keep everyone updated. No one forgets important rules this way.
