Building a Strong Finance Function from Scratch: A Simple Guide for Finance and Business Leaders.

Client: Good morning, Iwelabi. It’s been a super busy week. Thanks for the quick advice from yesterday’s session.

Iwelabi: Good morning, Sir! You’re welcome. Since we have limited time, let’s continue our discussion on controls, focusing on expense reimbursement, payroll, and revenue recognition.

Client: Right! We should get to it already.

Iwelabi: When it comes to Expense Reimbursement, having clear controls is essential to prevent errors, fraudulent claims, and excessive spending. First, implement a strict policy that requires employees to submit receipts for all reimbursement claims. Without receipts, claims shouldn't be processed—this ensures only legitimate expenses are reimbursed and provides records for audits. Additionally, introduce a review process where someone outside the claimant's team, say the internal auditor, reviews these expense claims. This adds an extra layer of oversight and reduces the chances of inappropriate expenses going unnoticed. Setting spending limits for categories like travel, meals, and accommodation is also a good practice, as it keeps employees from overspending. Lastly, don’t forget automating the processes and consider scheduling periodic reviews or audits of expense claims to ensure compliance with the policy. With these controls, businesses can manage expense reimbursements effectively and protect their finances.?

Iwelabi: Moving on to Payroll, it’s critical to have strong controls to prevent mistakes or fraud. A simple yet effective control is to have someone who isn’t involved in processing payroll review it regularly. For instance, after the payroll officer prepares the data, a finance manager should double-check the numbers before finalisation. This helps catch errors like overpayments or unauthorised salary changes. Another effective control is to conduct periodic payroll audits, where a member of the internal audit team reviews past payroll records to ensure there are no fake employees or incorrect payments. It's also important to separate duties in the payroll process so that the person entering data isn’t the same one approving it. Lastly, using an automated payroll system can enhance security by requiring approvals at various steps, ensuring everything is done correctly. With these measures, you can ensure your payroll system is accurate and secure.

Iwelabi: Now, let’s talk about Revenue Recognition. This is vital for maintaining accurate financial statements. To keep it straightforward and compliant with IFRS 15, only recognize revenue after the product has been delivered or the service has been completed. This prevents overstating revenue before it’s actually earned. Circumstances where you receive money in advance for a good to be delivered or a service to be rendered doesn’t mean you should recognise revenue. If anything, that’s a contract liability in your book.? For example, if your company sells a product, wait until the product has been delivered to the customer before recording the revenue. Similarly, for services, recognise revenue only after the service has been fully provided. Proper documentation is key—make sure every sale has supporting documents like contracts or delivery receipts, and match these with invoices. This will enhance accuracy and ensure compliance with IFRS 15 5-step model, which is crucial for transparency and avoiding legal issues. By having a structured process for revenue recognition, your financial records will reflect the true health of your business.

Client: Wow! This is really insightful. I’ve got more work ahead, but I think it’s time to start hiring my team. What do you think?

Iwelabi: Absolutely, that’s the next step. We should discuss how to build your team and what to look for in your candidates during our next session.

Client: Brilliant! Thanks for all you do, Boss.

Iwelabi: You are welcome, Sir!

Cheers,

#Iwelabi.