As a startup grows, inevitably more processes and procedures get put in place. One area of note that should be done sooner than later is financial controls. Yes, at first it is easy to keep track of everything when there are only five people but that doesn’t scale when there are 50 people.
Here are some simple financial controls for startups:
- Require two signatures for checks over a certain amount (e.g. $5,000)
- Put a modest spending limit (e.g. $2,000) on all corporate credit cards except for one that is designated for larger purchases
- If possible, separate out the accounts receivable function from the person who actually deposits the checks
- Pay for an annual review of your books by a CPA or get a full audit if required by investors
- While not financial controls, backup your data using Dropbox and your website using CodeGuard
For banks, it is a best practice that all employees take two weeks of consecutive vacation each year so that potential fraud will surface. That’s obviously for a different industry, but it is interesting to think about nonetheless. Financial controls are important for startups and should be implemented early on.
What else? What are some other financial controls startups should implement?