Most entrepreneurial efforts are boiler room operations at their earliest layer. The principals are usually friends or close business associates, so there’s a lot of trust and excitement.
And those early days are often very informal when it comes to keeping track of what’s coming in and going out.
But the early days are when internal controls should be established. This is a practice which keeps everybody on the same page and which further offers transparency.
But a ledger book won’t go far once your operation busts out of the boiler room, so this post is about how to scale internal controls as your company grows.
Getting It Done
Even if you’re working out of a couple of cardboard boxes in the CEO’s garage, putting internal controls in place establishes good administrative practices as a company value. They professionalize your operation and set the stage for what’s on the horizon.
Here’s what you need to get done now:
- Record-keeping is crucial. You’re busy promoting and selling. But leaving the books to chance is a recipe for disaster. When the first quarter rolls around, a shoebox full of receipts and informal jottings just isn’t going to cut it. Neither is an Excel spreadsheet which has only been updated intermittently.
- All decisions should be reached and co-signed by at least two of the principals. This is about more than trust. It’s about people with skin in the game agreeing about crucial financial decisions.
- Organize your paper early. Ensure that all is reconciled to reality. This is a habit which will stand you in good stead when it comes to forecasting and budgeting.
You’re off the blocks and ready to hire. But do you have policies and procedures in place? An employee handbook? Are your job descriptions clear? These should be prepared before that first employee walks through the door.
In the beginning, founding partners should be as present to new hires as possible. Ensuring that they’re doing what you need them to and that their work is accurate is a habit which will save you plenty of time later. When things go wrong at this stage, they can set off a chain of events which will have you regretting not paying closer attention.
Your operation is chugging along and growing sustainably. You’re a mid-sized business now! That means the boiler room is gone forever and it’s time to get more formal.
Adhering to Generally Accepted Accounting Principals should have already been on your radar but if you’ve been lax on that front, you can still get there. If you’re seeking financial partners, they’ll expect your books to be in order.
Getting your ducks in a row with scalable internal controls is an ongoing process. Your practices will evolve with time, expansion and additions to your roster of employees. Being in command of the internal processes you need is established in the boiler room and grown with you.
Norton Financials takes the books off your hands. Leaving the boiler room behind? Contact us.