In this insightful article, Sandip Khetan, Co-founder & Global Head of Accounting and Reporting Consulting, and Sagar Lakhani, Partner at Uniqus Consultech, examine the significance of internal financial controls for startups. How can startups balance rapid growth with the need for robust financial management to ensure long-term success?
Startups in India are playing a pivotal role in the growth of the economy. Leading in innovation and digital technology or employment, startups are an essential cog in the wheel of the economy. Startups operate in a dynamic and often high-risk environment. While agility is key to the rapid growth of an enterprise, ensuring the company’s long-term viability necessitates a strong foundation built on robust internal financial controls. These controls act as essential checks and balances, safeguarding financial health and fostering sustainable growth.
This article examines the significance of internal controls, their key components, the challenges faced by startups in this regard, and suggested best practices for their implementation.
Importance of Internal Controls for Startups
Internal financial controls are a set of policies and procedures designed to mitigate risks, ensure the accuracy of financial reporting, and promote operational efficiency. In a startup environment, these controls play a critical role in several key aspects:
Risk Mitigation: Startups face a multitude of financial and operational risks. Internal controls help identify potential threats (e.g., fraud, errors, unauthorized transactions) and implement measures to prevent or minimize their impact.
A well-written Risk Management Policy is crucial for startups across all stages. As startups progress from the ‘early’ stage, some other policies also gain significance – these include a whistle-blower policy, a code of conduct for directors, senior executives, and employees, and IT policies, including data governance and an information security policy.
To read the full article, view ET CFO
