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

Day 10/30

#Accounting and #Finance with #Iwelabi

The conversation between Consultant Iwelabi and his client continues:

Client: Good Morning, Iwelabi. Thanks a lot for all you do. I find our sessions really informative and instructive. Based on our last conversation, I’ve started sketching out some high-level points for the accounting policies and procedures manual. For now, it’s just to make sure I have a foundation that the team I hope to build can expand upon.

Iwelabi: Good morning, Sir! That’s excellent! Starting with a high-level outline is a great approach. It will give you a clear sense of what’s critical and will indeed help guide your team later. As we discussed before, it’s all about laying the right foundation.

Client: (feeling grateful) Yes, and I’m really glad you’re helping me focus on the essentials. These sessions have been wonderful—priceless, really. They’re shaping how I think about planning and execution.

Iwelabi: (Blushing) Many thanks for the feedback, Sir. I mentioned that we would be looking at controls in our last session. It's time to pick it up.

Client: Right!

Iwelabi: Controls are the backbone of a solid finance function. They ensure accuracy, reduce risks, and improve the integrity of your processes—and ultimately your numbers. Let’s walk through a few simple but effective internal controls for key processes. These will help as you build out your high-level plan, and later when your team digs into the details.

Let’s start with the most important item for all businesses—cash. As a CFO, your job, comprehensive as it may seem, still revolves around cash inflows and outflows and how effectively you manage both to maximize shareholder wealth. For effective control over cash management, the first thing I would advise is to reduce as many paper cash transactions as possible and encourage the use of electronic money transfers. This allows for an audit trail of cash movement, ensuring that all cash exchanges occur solely through the business accounts. It is also crucial to ensure segregation of duties in cash management. The person making payments from the bank should not be the same person reconciling the bank accounts. Lastly, on your banking platforms, ensure there is a two-step payment system, with one person initiating the payment and another person approving it before it can be processed. This helps prevent fraud and errors, as no single person has control over the entire cash cycle.

Next is Procurement. For this, you need to ensure that a tiered approval system is in place, leveraging tools like Google Forms Approval or Microsoft Forms and Power Automate. This allows you to use an automated system where someone can make a request, and while doing so, the system ensures that supporting documentation is collected and saved to the drive. With such an automated system, when a member of any department submits a procurement request, it goes directly to the department’s HOD, who decides to approve or reject it via email and with just one click. Upon approval, the request is automatically sent to the authorizer, then to finance, and finally to any other executive team members who are required to give approval before any money is spent—ensuring that no funds are disbursed without proper authorization. Lastlt, to further strengthen controls, once the goods or services are received, a Goods Received Note (GRN) should be issued and signed by the person responsible for receiving the items. Such should then be uploaded into the drive via a Google or Microsoft Form retirement referencing the unique ID used to raise the request. This ensures that the goods or services delivered match the original order.

Client: Wow! This is already a lot!

Iwelabi: We still have controls to discuss around expense reimbursement, payroll and revenue recognition.

Client: Hmn. Please let’s save those for our next session.

Iwelabi: Very well!

Cheers,

#Iwelabi.