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Financial Controller as Part of the Internal Control System

04 May 2023

Does your company have internal control systems in place, and have you considered how effective your company's internal control environment is? The financial controller plays a crucial role as part of the internal control system, as accurate financial data assists in developing business processes to make your company more efficient.

The main functions of internal control are to map existing business processes and verify their functioning. Processes must be documented and operational in reality. Therefore, internal control must provide confidence that things in real life work as they are written on paper, or conversely, that they are written on paper as they actually work. A good example is accounting, where possible dysfunction is a significant operational risk for the company.

The financial controller essentially starts where the accountant finishes: prepares detailed reports for management and the group, checks budget fulfillment, analyzes revenues and costs, seeks reasons where and why the budget and actual result differ, and so on. In smaller companies, the controller's role is often filled by either the (chief) accountant or the manager himself, but thinking of efficiency, it makes sense to separate these functions. This way, the workload is distributed more evenly, and all parties can concentrate on their respective tasks, which also reduces the likelihood of errors due to human cause.

In addition to clarifying the company's actual financial results compared to the forecast, the controller, as part of an effective internal control system, helps avoid various negative consequences. For example, time and financial loss resulting from non-compliance with various laws and regulations, potential lawsuits, or possible manipulation of data by employees. As sales and production volumes increase, the financial controller also helps monitor thresholds, for example, when a company becomes subject to review or audit obligations, and timely indicates this, which in turn provides an opportunity for the company to obtain necessary offers in a timely manner and not to be late with submitting audits.

However, until workloads are sufficient to hire a full-time financial controller, it is a good opportunity to outsource this service. A financial controller is not a convenience service but an essential assistant to an efficiency-minded management.

You can read more about the daily work of a controller in an interview with BDO Estonia's controllers: