Establishing strong financial governance ensures genuine stewardship, accountability, transparency, and sustainability. Without proper structures, procedures, and documentation in place, an organisation risks negatively impacting its operations. Given that trust is the cornerstone of the accounting profession, there is an even greater duty to conduct business ethically and transparently.
So, what does governance look like, and how can finance functions ensure they’re created with an effective financial governance structure so their team and the broader business can thrive?
Strong financial governance
Strong governance within your finance team includes internal controls, policies and procedures, and clearly defined roles and responsibilities. Effective internal controls create accurate financial records all stakeholders can rely on.
For example, it could look like consistent and regular reconciliation processes, mandatory approval for any expenditure over a value the business classes as material, documented processes for how the business recognises revenue, ensuring each pay run is signed off and fraud-prevention measures.
Segregation of duties is also critical. In smaller businesses with limited resources, it’s even more important to establish robust segregation of duties to minimise the potential of inaccurate, untrustworthy or fraudulent financial data.
Why is it important?
Financial governance is important as it provides stability and regulatory compliance within the financial function of a business. It ensures transparency and accuracy for financial data, essential for making informed decisions, and ensuring stakeholders are updated with the correct information.
It also helps reduce the risk of legal issues and penalties, protecting the assets and reputation of an organisation. Strong financial governance promotes and supports a culture of stability, integrity and sustainability in any organisation.
Gaining confidence
There are various ways businesses can be confident in their financial governance frameworks, procedures and documentation. Some strategies businesses can implement are below:
- Conduct regular internal and external audits
- Communicate effectively with the Board and Audit committees
- Ensure the Board and Audit committees have the expertise to know what to look for
- Create a strong culture of employee advocacy to ensure they’re onboard with business priorities
- Reduce room for employees to become complacent
- Seek advice from an expert external advisor such an Outsourced CFO who can provide recommendations on governance improvements
We’re here to help
Good financial governance can positively impact a finance team. It’s essential to not only ensure you’re compliant with new rules and regulations, but it creates harmony and structure for daily operations. Companies should review their financial team’s duties regularly to ensure they’re up to date with stringent policies by putting good financial governance in place to help prevent potential issues from arising.
Our Outsourced CFO team can assist you in ensuring your business has strong financial rigor and help you understand how your finance team should be structured for success. If you would like to have a conversation about how our team of experts can assist you and your finance team, please reach out to one of our specialists today.
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