Financial control systems are considered as important part in the organization because they play major role in protecting the organization's resources from fraud and also ensures accuracy of reporting.
FREMONT, CA: As required by SOX section 404, finance and accounting departments have scrambled to put in place internal control systems. Compliance with SOX and SEC regulations are undoubtedly good reasons for companies to create a financial control system. Sometimes small and medium business (SMB) owners might think that how it will, this applies to them or helps improve their business metrics because they have a few investors or creditors and need to produce financial statements. Still, you don’t have to worry about complying with SEC or SOX regulations.
What is an Internal Control System?
It is interesting to notice, however, that in many cases, the internal system at public companies consists of a volume of instruction-like procedures that document activities. If a corporation is taking the time and energy to develop a method based, financial system, then it seems well worth the bit of additional effort it might take to:
• Understand major financial processes
• Establish key finance policies and goals (including performance goals also as producing accurate financial statements)
• Determine which methods provide A level of risk or materiality in reaching business goals
• Prioritize development of the system consistent with materiality, risk, and other vital goals
• Incorporate best practices and a continuous improvement philosophy to create effective processes and nurture a culture of improvement
A Better Financial Control System that Focuses on Success
Businesses cannot ignore reasonable controls over their cash drawer, but just focusing on small components while not knowing how much cash is tied up in receivables does not represent a control system that recognizes priorities and risks. Concentrate on the rote and mundane can improve overall financial performance. Financial control systems should try to enhance critical aspects of the financial operation, such as:
• Try to increase returns while reducing costs for cash and merchant accounts
• Review regularly and try to improve the overall capital structure.
• Minimize the cost of capital by using a capital plan and also strengthen the Debt/Equity position.
• While making debt/investment or leasing decisions, ensure proper calculations and scenarios are explored.
If an organization has a control system of well-defined processes, then it is not only about control or compliance but is also about consistently striving to do a little better.
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