Building a Strong Foundation: The Power of Preventative Measures

Author: Jeff Weegar

Building a Strong Foundation: The Power of Preventative Measures

A financial advisors desk with a phone and laptop on it in front of a couch.

Benjamin Franklin once stated “an ounce of prevention is worth a pound of cure.” We all know what that means as it pertains to our health and the daily choices we make, but what if I told you that the same principle applies to your business? Inspired by a colleague’s unfortunate encounter with embezzlement, I felt compelled to shed light on the vital role of internal controls in safeguarding your investments and thwarting fraud before it strikes.

When engaging with clients, my first inquiry often revolves around their accounting policies. This simple question unravels the extent to which a business has fortified its practices, ensuring financial stability and the integrity of its financial reports. This is especially crucial for smaller enterprises lacking extensive accounting teams.

Here are some compelling reasons why investing time in documenting and implementing robust accounting policies pays dividends:

  1. Protect Assets: Beyond tangible resources like inventory and cash, safeguarding intangible assets such as customer data is paramount in today’s digital age. Customers trust your company with their information, and expect you are taking necessary measures to protect it from being used for nefarious purposes and from bad actors.
  2. Enhance Operational Efficiency: Standardizing workflows and streamlining processes not only fosters clarity but can also boost productivity. Additionally, CRMs are continually evolving, particularly with AI continuing to progress. Periodically reviewing your policies could identify new available technologies that are creating redundancies in your processes.
  3. Ensure Compliance: Documenting internal controls helps to navigate current regulatory complexities and consideration of regulatory penalty and repetitional harm. Identifying risks and establishing mitigating controls not only ensures prevention, but will create a “playbook” if something unforeseen does occur.
  4. Detect and Prevent Fraud: Proactive measures trump reactive responses when combating fraud, underscoring the importance of robust checks and balances. Documenting responsibilities and mitigating processes will often deter folks from trying to develop fraudulent schemes if there is a high risk of being caught.
  5. Facilitate Decision-Making: Informed decisions hinge upon reliable financial data. Leaders and decision-makers must have confidence in the data they are presented to best ensure collective success.
  6. Foster Trust and Transparency: Transparency is the currency of trust in today’s business landscape. Fostering stronger relationships with stakeholders and customers has never been more reliant on these principles. Make sure you are taking the steps necessary to ensure trust continues to build with stakeholders.

In essence, internal controls serve as the bedrock of organizational integrity, fostering accountability, operational excellence, and stakeholder confidence. As we navigate the complexities of modern business, let’s not underestimate the significance of a sound control framework. I recommend that we all take a moment to review our policies. Ensure our policies are documented, current, and operating effectively. Your future self will thank you.

I’m eager to hear your experiences and insights on fortifying your business. Feel free to reach out for further discussion. Let’s safeguard our ventures together.