Financial controls that never leave the business

Key takeaways

Financial controls for small businesses are the checks that stop errors and fraud. When bookkeeping is outsourced, the processing moves but the key controls stay: approving payments, changing bank details, reviewing reconciliations, approving write-offs and reviewing the monthly numbers. These take a few hours a month and protect everything else.

• Keep 6 controls in-house: payments, bank details, write-offs and three reviews.
• Separate who records, who approves and who reviews.
• Expect 2 to 4 hours a month of owner review time.
• Check the provider's work by sample, not by redoing it.

Which financial controls stay in-house?

Six controls cover most of the risk in an SME.

• Approving and releasing payments.
• Approving new suppliers and any change of bank details.
• Approving credit notes and write-offs.
• Reviewing the monthly bank reconciliation.
• Reviewing management accounts against budget.
• Reviewing payroll before it is paid.

• Which business processes should you never outsource?
• Bank mandates and payment authority: keep the keys

Why do these controls stay when the work moves?

Because a control only works if the person applying it is independent of the person doing the work. If the provider both records and approves, nobody checks the provider. Keeping approvals and reviews with the business also keeps the directors informed, which they need to meet their duties.

• The four eyes principle for small businesses
• You can outsource the work, never the accountability

What does the provider do?

Records transactions, matches invoices, prepares payment batches, reconciles bank accounts, prepares management accounts and flags anything unusual. A good provider welcomes your controls, because they protect both sides when something goes wrong.

• Finance processes to outsource, and the ones to keep
• Management accounts: outsource the pack, keep the review

How do you check the provider's work?

Sample, do not redo. Each month, pick a few transactions and trace them to the invoice and approval, check the bank reconciliation balances, and read the exceptions list. Ask questions about anything that moves unexpectedly in the management accounts.

• Can you measure it? The test every outsourced process needs

What does this look like in practice?

A pattern we see: when bookkeeping moves out, the owner stops looking at the numbers because 'the accountant handles it'. A one-hour monthly review of the reconciliation, payments list and accounts restores control without taking the work back.

• See client work
• BPO Solutions for UK businesses

Financial controls checklist

• Keep payment approval and release in-house.
• Approve every new supplier and bank detail change.
• Approve credit notes and write-offs.
• Review the bank reconciliation monthly.
• Review management accounts monthly.
• Sample a few transactions each month.

• Writing off bad debt: a decision you keep
• Investor relations: why founders keep the conversation

Next step

Write down who records, who approves and who reviews each of the six controls. Any name that appears twice on one line is a gap.