If you were audited today, how compliant would your organization be? Do you have the appropriate internal controls in place to secure the accuracy of all your numbers? Let’s face it, new regulations are changing the game all the time and it’s not easy to keep up. So what can you do? There is no magic formula, but there are in fact proven ways to better mitigate risks, streamline processes and be prepared.
In all too many organizations, internal controls are seen as a burden: a source of growing labor costs and time-consuming documentation. But for today’s top-performing finance departments, this couldn’t be further from the truth. By integrating a standardized risk and control framework into their day-to-day activities and reporting processes, industry leaders have transformed these functions into critical value-added tasks.
Studies have shown that strong risk management and systems of internal control have a positive impact on long-term business performance and earnings potential.
The 5 essential building blocks
If you’ve already implemented an internal control framework such as COSO*, you’re far from alone. Still, there’s a good chance that your organization may have stopped short of utilizing these guidelines to their full potential. Look beyond simple documentation routines, and use these five key pillars to regularly reassess and optimize your current internal control structures:
- Control environment: Is everyone in your department consistently aware of key risks including fraud, manual errors and spreadsheets?
- Risk assessment: Have the prioritized risks been sufficiently analyzed and aligned with core strategic and financial objectives?
- Information and communication: Have all finance personnel been informed of the true purpose of each control activity?
- Monitoring: Are your IT systems purpose-built for financial close process monitoring, making it possible to continuously monitor, adapt and refine your processes?
- Control activities: Are transaction matching processes, manual routines, audit trails and access limits clearly defined and automated?
Stay ahead of known risks
Once you’ve confirmed the quality of your internal control framework, it’s time to think like an external auditor. Start by taking a look at the most common audit standards and ask yourself: What’s the risk that our balances and transactions are non-compliant with known risks? Is all inventory recognized in the balance sheet? Have all recorded transactions actually taken place? Have all transactions been recorded in the correct accounting period? Purpose-built financial close software can give you a fully automated audit trail with customized controls, making the answers to these questions far easier, and faster, to find.
How can you strengthen your controls, starting now?
A comprehensive update to your internal financial controls – including reconciliation processes, data matching, Excel reconciliation, bank reconciliation and more – may seem like a daunting task. But there are plenty of ways to get started today. A few we’ve received from financial experts would apply to any organization:
- Prepare and implement a Risk and Control Matrix to better define risks, materiality and scope.
- Bring your controls to life by embedding them into day-to-day activities, documentation and service agreements.
- Automate your controls and integrate with your ERP system.
- Monitor your control performance continuously to enhance routines and ensure compliance.
Get the full picture
Are you ready to take the next step towards automated financial control and compliance? Need more tips on how to ensure that your board, stakeholders and regulators can truly trust your numbers? Download our new e-guide: A guide to increase Control & Compliance at the Finance Department