Tuesday, August 4, 2015

3 Critical Aspects of Financial Controls in Business

There can be a litany of financial dangers posed to a business.  These dangers might come from within the business itself or be posed from external elements.  However, over my time spent as a hotel director of finance, I learned that there were three critical aspects to help maintain good financial controls in a business or organization.

Checks and balances
Checks and balances might be the most critical aspect to maintaining financial control in business.  Controlling what other people did, while other people controlled what I did helped not only to reduce the opportunity for dishonesty, but helped pinpoint errors or find better ways of doing things, as well as learn about other jobs and job duties inside the organization.

However, it was more than just checks and balances inside the hotel that helped reduce the chance of theft, fraud or mistakes.  I also had reports I had to make or things I had to get approval to do from the hotel’s corporate office, our bank, the hotel ownership, or our hotel general manager to ensure that things were on the up and up.

Separation of duties
Separation of duties among various higher-level power holders within an organization can also be a key aspect of good business financial controls.  Ensuring that any one person or department within an organization doesn’t have too much power can help eliminate or at least reduce the temptation for wrongdoing or corruption.

In my case, as director of finance, there were times at which portions of my duties were assigned to others outside my department – sometimes higher, sometimes lower on the organizational chain.  For example, since I was in charge of posting any payments due the hotel, I had a lot of money passing through my office.  However, there was a combination of checks and balances and separation of duties involved in the process.  Our human resources assistant received and opened the mail, creating a check log of monies received in the process.  I posted such payments to our accounts receivable, and our general manager and front office manager signed off on this, verifying that the amounts I posted matched the amounts we received.

Much needed time off
As a welcome requirement of my role, I was directed to take two consecutive weeks off each calendar year.  This wasn’t because my employer wanted me well rested and content with my work but rather to allow others to temporarily take on my duties to ensure things were being handled properly.

Two weeks can be a long time to attempt any sort of cover up of wrong doing in the financial world.  Unknown checks and invoices can arrive in the mail.  Shortfalls or imbalances in accounts might be noticed.  Odd variances could be unveiled.  Those handling my duties for several weeks would have a greater chance of uncovering potential oddities with me out of the office for a substantial period of time, and thus, the two consecutive weeks off each year.   



Disclaimer:

The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

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