The first 24 months of a startup lay the foundation for its future success. Young companies redesign the wheel, disrupt an industry, or identify a way to plan an ICO to raise funds off cyrpto-tailwinds. These grand plans don’t need to be bogged down by also reinventing business operations and controls.
Prior to my time at Ordway, I built a checklist of controls, used with my companies, that I feel every startup needs to accomplish during their first two years of operation.
Download the 38 Financial Controls
for Startups Checklist
This is the second in a series of blog posts in which I will share templates with my fellow finance and operations professionals in the SMB market.
Internal controls align an organization towards operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.
In general, internal controls are broken down into preventative and directive categories. These controls enable business leaders multiple lines of defense to mitigate risk, ensure smooth operations, and to lay a foundation upon which a successful business can thrive.
Internal controls are important to protect reputation as was witnessed by the fallout of SoFi’s scandals or the issues surrounding Theranos’ downfall. One never knows, but if they had implemented the 38 recommended controls early on in their existence, their current positions might be better. In SoFi’s example, they have weathered the storm, but probably experienced a dip in efficiency, but Theranos is another matter.
Make Sure Your Financial Systems Mitigate Risk
Setting up financial systems to withstand an audit, implementing sound HR policies and procedures, and ensuring physical and virtual security are critical to success. Additionally, identifying and investing in software that can help reinforce the controls that you have in place is important to making sure your controls are not just poster, a Googlesheet somewhere on your team’s shared Google Drive, or a printout in a binder on someone’s desk. One example of software that can support internal controls is a billing and revenue automation platform. Setting up systems to have audit trails, access controls on importing and exporting from QuickBooks (or another ledger system), and to manage pricing flexibly and securely are what ultimately mitigates future risk to the organization.