Establishing Internal Financial Controls

How to give yourself a full view of your company's financial picture

By Greg Brown

Sales are going great guns. Operations are humming. Your partners are thrilled. But that gnawing feeling keeps you awake nights: Will cash flow stay steady? Is payroll on time? What if things slow down?

Getting financial controls right means knowing the answers to these questions and more, day to day, even minute to minute if needed. Obtaining a 360-degree view of your company will give you the information you need to take bold decisions.

Check your processes first

Short of being a CPA, it's rare that small business owners adequately track what's going on in their own company — until they grow, but by then it's hard to start.
Try: The U.S. Small Business Administration has an online checklist of essential internal controls. Copedia offers spreadsheets predesigned for tracking financials within a small business. Bizmanuals sells a soft-cover book that comes with a CD of controls templates.

A shrink-wrapped box from the office store could save your company

Many thousands of small companies find off-the-shelf software running on a PC is enough – learned in a few weekends or with the help of a part-time bookkeeper – to move from shoebox accounting to tracking, reporting and less stress at tax time.
Try: By far the most popular software at this level has been QuickBooks. Intuit, the publisher of QuickBooks, maintains a free training site, too.

Getting into the (sort of) big leagues

If you've longed moved on from a handful of spreadsheets, and especially if you have multiple offices or several managers empowered to make financial calls, it makes sense to consider what is now called enterprise resource management (ERP) software.
Try: Oracle, SAP, Sage, Microsoft, Intacct, Everest and NetSuite all sell small to medium-sized business versions of their accounting and controls software. Often, it can be Web-based — no need to buy servers!

Send it out completely

Payroll processing companies have moved upstream into tracking all manner of compliance and controls, including hiring (and firing), benefits, retirement and so on.
Try: Among the largest of these service providers is ADP.

Do not fall into the trap of trying to be your own full-time accountant. If what you bring to the table is management skills or sales flair, hire a data entry person and ask your CPA to periodically review the work.
Financial and other controls (like HR or benefits) can be very important for proving your intent later in a court of law — if necessary. Keep permanent copies off site.
Here's an incentive: Clear records can help you make your case for better credit terms, particularly with banks that lend only reluctantly to small businesses.
Considering issuing shares or seeking venture capital? Then your needs are far more complex thanks to post-Enron regulations known as Sarbanes-Oxley, or SOX. Call in professionals if you think an IPO is a serious possibility, and hire an experienced chief financial officer soon.