Finance and controls: Guide on improving compliance

Effective finance and controls are key to strong financial management, helping your business maintain accuracy and full compliance. They serve as a crucial safeguard against financial risks and protecting your assets.

Whether you need to refine existing controls or implement new ones, a business management solution like Intuit Enterprise Suite can help streamline financial processes and improve overall business efficiency. 

Let’s explore the different types of financial controls and best practices to enhance compliance and efficiency.

Understanding finance and controls

Financial control systems protect assets, enhance operational efficiency, and ensure compliance with financial regulations. These systems include policies, procedures, and tools that maintain financial integrity while minimizing risk. 

Modern financial management solutions, such as enterprise resource planning (ERP) systems, can automate and streamline these processes. The key objectives of financial control systems include:

• Protecting assets: Safeguarding company resources from damage, fraud, misuse, and theft.
• Operational efficiency: Ensuring resources are used effectively to minimize waste and maximize productivity.
• Compliance: Adhering to relevant laws, regulations, and industry standards.
• Reliable financial reporting: Generating accurate financial information for decision-making.

Types of financial controls

Financial controls can be divided into three categories: preventive, detective, and corrective. Each plays a role in maintaining the integrity of financial processes and ensuring financial security.

Preventive controls

Preventive controls aim to stop errors or fraudulent activities before they happen. Examples include:

• Segregation of duties
• Approval and authorization processes
• Access restrictions to sensitive financial data
• Multi-factor authentication and password policies
• Employee training on ethical behavior and compliance

These controls help create a proactive defense against financial errors, fraud, and other risks by establishing barriers before issues arise.

Detective controls

Detective controls identify and detect financial errors or irregularities that have already occurred. Examples include:

• Reviews
• Reconciliations
• Automated alerts for unusual transactions
• Internal audits
• Analysis of financial accounting data

These measures help uncover potential issues early, allowing for timely correction and reducing the impact of financial discrepancies.

Corrective Controls

Corrective controls resolve issues identified by detective controls to rectify problems and prevent recurrence. Examples include:

• Process improvements 
• Disciplinary actions
• Financial restatements
• System updates or changes to enhance controls

These measures help ensure that identified issues are addressed effectively and similar problems do not arise in the future.

How to implement financial controls for compliance

Implementing financial controls requires a systematic approach to minimize financial risks and ensure compliance with regulations.

1. Assess your financial risks

Conduct a comprehensive risk assessment to identify potential financial risks, such as fraud, accounting errors, and compliance gaps, laying the foundation for an effective financial control system.

2. Design a financial control framework

Develop a structured approach that incorporates policies, procedures, and controls tailored to the organization's specific needs to ensure effective financial management and compliance. 

3. Establishing internal control policies

Document clear guidelines for financial operations, including internal control policies that define responsibilities and procedures to ensure consistency and accountability. Proper employee training on these policies will help maintain a strong control framework across the organization.

4. Implement transaction approval workflows

Create workflows that mandate proper approvals for financial transactions to prevent unauthorized actions. Regularly review and update approval procedures to adapt to changing business needs and regulatory requirements.

5. Monitor and review controls

Review and monitor financial controls through internal auditing and review processes to assess their effectiveness. This oversight helps businesses identify potential inefficiencies in their financial systems, allowing for timely improvements and ensuring alignment with financial goals.

Examples of financial controls

Implementing strong financial controls helps businesses maintain accuracy, prevent fraud, and ensure compliance. Here are some key examples:

• Segregating accounts payable and receivable duties: Reducing the risk of fraud by ensuring that different employees handle these functions.
• Regular reconciliations: Comparing financial records to detect discrepancies and maintain accuracy.
• Internal and surprise audits: Conducting scheduled and unannounced audits to evaluate financial integrity.
• Budgeting and forecasting processes: Establishing financial plans to guide spending and investment decisions.

Adopting these financial control measures helps businesses minimize risks, improve efficiency, and establish a solid financial foundation.

Financial controls and compliance best practices

To safeguard financial health and maintain compliance, businesses should implement the following best practices:

• Establish and maintain a comprehensive internal controls program.
• Perform regular financial reporting and analysis.
• Implement robust fraud prevention measures.
• Regularly update and review financial policies and procedures.
• Provide regular training to employees on financial controls and compliance.

By implementing strong financial controls, businesses can enhance their enterprise value through improved operational efficiency and financial integrity. 

Boost productivity and enhance profitability

Robust financial controls protect assets, enhance efficiency, and deliver actionable KPIs, enabling data-driven decisions that boost profitability and ensure long-term success.

A strong control framework shields assets and provides the reliable financial insights needed for strategic decision-making. Explore the Intuit Enterprise Suite today to transform your financial operations and strengthen your control environment.