Control and Compliance

Welcome to the seventh edition of the go-to newsletter for Start-ups and SMEs - The SME Snapshot. We are here to help with concise, easy-to-digest tips and advice on how best to look after your business - from the experts at AFP Services. To find out more about AFP and what we do, click here. To make sure you don't miss next month's edition - subscribe!

This month, we are looking at the crucial elements of control and compliance.

1.???What is compliance?

The idea of financial compliance may appear complex at first, but it is as simple as following the rules. Essentially, it's about preventing fraud, tax evasion, and money laundering in your business. However, it's not just about showing the authorities that you are not doing anything illegal. In addition to providing peace of mind, the right policies can also assist in reducing risks.

Compliance stretches to many other areas of business as well as financial, for example-

Are you…

?? Regulated by professional regulators (i.e., Financial Conduct Authority, Environment Authority)?

?? Complying with financial regulations such as tax, payroll, HMRC, accounting, record-keeping,?Companies House, and Anti-Money Laundering Regulations?

?? Ensuring you are adhering to employment law and workers’ rights?

?? Thinking about Health and safety for workers and visitors to your offices/site?

?? Holding personal data, and therefore fall under General Data Protection Regulation (GDPR)?

?? Under contracts and agreements with third parties?

?? In need of any licenses or permits to operate in your sector? I.e. alcohol, or food handling?

Chances are, your business will be subject to many of the above, and being non-compliant can result in hefty fines that can damage your bottom line or even further legal action. It can also damage your business’ reputation. It is important when setting up your business, and along the way, to keep assessing which laws your business is subject to.

Compliance should be an active role within the business, it’s not about waiting to get audited, you should be able to prove to anyone, at any time, that you are compliant.

2.???What controls do I need to put in place?

Controls are layers of security. What happens if something goes wrong, and how do you stop it from happening again?

For example, imagine you have just hired a new marketing team and they have spent their budget very quickly, in a mixture of personal and business expenditures. Your inexperienced accounts assistant is putting through the spend and logs it all as a tax - deductible business spend. If you get audited, this will be flagged, and you could be hit with a big tax bill, affecting your bottom line.

Good financial controls would mean that if there’s a problem in a process, it’s easy to see where things are going wrong and why. It helps identify risks quickly and easily, whether it be a supplier issue or a bad debtor. Less than optimal financial controls can lead to wrong decisions, operational and accounting issues, cashflow problems, and in extreme cases, fraud, and fines.

Controls should be overseen at senior management level, and there should be a process that everyone in the business is aware of.

If you’re a director, that means you are ultimately responsible for whether you’re compliant or not. Putting the correct controls in place can mean that you can catch issues early and deal with them properly.

The onus on businesses to ensure they are fully compliant is getting tougher, whether it's increased scrutiny from stakeholders following previous financial problems, re-evaluating existing relationships from current partners to prepare for operating differently in a post-pandemic world, or tougher rules imposed by regulators.

Due to the costs involved and the size of small to medium enterprises, it is not always possible to have a dedicated manager or team to handle these tasks. Most of the time, it is a bolt-on to someone else's job, which can be problematic. Providing the right training and support can make this a viable option, but if the person who has assumed this role does not have experience, qualifications, and most importantly motivation in these areas, then the company can be at risk.

That’s where we come in. Our dedicated Tax and Compliance team have come across most things that have to be compliant for your business and our Accounting Services and Operations departments look after proper processes and what needs to be done in the right way.

Running a business doesn’t have to be stressful, if you seek the right expert advice, and surround yourself with the right team. We have been supporting SMEs through different stages of growth for 20 years, so if you’re looking for experience and reassurance, you’re in the right place. Get in touch today to find out how we can help you make your business fully compliant, and take it to the next step of your growth journey.

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The SME Snapshot is published monthly, focusing on topics that are important to Start-ups, SME’s, and growing businesses. Thought of something you think should be covered? Tell us in the comments below ??

Looking for support in growing your business? Contact us at?[email protected]. To find out more about how we help businesses grow the smart way, visit our website?here.

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