With a squeeze on company profits, businesses are looking for smarter ways to manage their budgets. With that has come greater realisation that internal financial controls have a big part to play. Here we share the trends in how the accounting industry responds to this pressing issue and the accounting technology playing a significant role in this shift in focus.
This is the reason for adopting better financial controls
Streamlining how businesses buy from suppliers affects the bottom line in more ways than one. A growing emphasis on internal controls offers ways to respond to increased regulatory scrutiny and evolving accounting standards.
- Financial information can be trusted – controls ensure financial information’s accuracy, reliability, and integrity.
- Assets better protected – businesses can monitor and track the flow of assets, reducing the risk of mismanagement or loss.
- Fraud deterrence – separating the roles of approving purchases, receiving goods, and making payments helps prevent employees from misusing company funds or diverting assets for personal gain.
- Better compliance with regulations – can meet tougher ATO, Anti-Money Laundering (AML) and accounting standards around financial reporting and disclosure with more accurate records and simpler auditing procedures.
Business and accounting are adapting to pressure with new tech
There’s now plenty of tech in the clever accountant and bookkeeper’s scope, from automated accounting systems and data analytics to cloud-based solutions. Different countries are quick to innovate, while others are more cautious. All though are welcoming the tech discussion, and achieving tighter financial controls in a few ways:
- Efficiency – Clearer rules and processes enhance accuracy and real-time monitoring.
- Risk management – New tech is making it easier to protect finances against fraud, cybercrime, data mishandling and compliance errors. This ultimately enables protection from penalties, legal liabilities, or reputational damage.
- Meeting regulatory changes – Stricter financial controls enable accountants to keep pace with a fast-moving regulation landscape. Rules are changing to meet the challenges of digital innovation, Anti-Money Laundering (AML), data privacy, tax priorities, and financial disclosure and reporting.
The benefits of tightening financial approval processes
ApprovalMax has satisfied a pent-up demand for tighter financial controls with technology that makes it clearer to assign responsibilities and keep decision-making in check. The proper asset management measures work to safeguard and prevent unauthorised use. It facilitates:
- Segregation of duties – This is about separating responsibilities and duties among individuals or departments. Businesses can reduce the risk of fraudulent activities by dividing tasks such as authorisation, record-keeping, custody of assets, and reconciliation. For example, separating the roles of approving purchases, receiving goods, and making payments helps prevent employees from misusing company funds or diverting assets for personal gain.
- Documentation of policies and procedures – Financial controls establish clear policy guidelines for cash management, inventory control, and procurement processes. Standardised procedures help ensure consistency, accountability, and compliance with internal policies and external regulations. By documenting these processes, businesses can monitor and track the flow of assets, reducing the risk of mismanagement or loss.
- Stricter budget and accountability controls – With clearer approval processes for expenditures, investments, and other asset-related transactions, assets are used for legitimate business purposes. There is appropriate oversight and accountability. Authorisation levels, budgetary controls, and expenditure limits help prevent unauthorised or excessive spending that could deplete assets or increase the risk of financial loss.
- Accuracy and compliance – Automation helps reduce human errors, ensure consistent processes, data protection, and provide real-time visibility into asset movements and transactions.
The next step is to investigate technology for more robust controls
With the tech comes the solution to fix these pressing issues. Accounting firms stand to benefit as much as their clients. The natural next trend is more and more will be adopting these solutions. By staying ahead of technological developments, businesses can maintain a competitive edge, improve operational effectiveness, and ensure their financial controls remain robust in the face of changing business risks.