Hi. In today’s 2 minute takeaway, I want to take a little look at corporate governance and how it relates to you and your smaller growing business. I’m Hillary O’Dwyer, founder of Titian consulting, your virtual CFO.
What is Corporate Governance?:
So corporate governance is something that we’ve been hearing a lot about in the press and bad corporate governance has resulted in things like the Royal Banking Commission, which is where the board of directors has been held accountable for things that have gone wrong, because they haven’t provided adequate oversight or had appropriate controls or processes in the business or they’ve had them, but they haven’t been followed. So very simply, corporate governance relates to how your business is directed and managed. It’s about oversight and how your business is run.
How does this relate to your growing business?:
So how does this relate to your business and what are the benefits of it? So if you think very simply about it, if you’re looking at your business at an overview or looking at it with an external advisor, you going to potentially see some stuff that you wouldn’t see otherwise, and this can lead to a chance to de-risk your business through fraud or otherwise.
Ideas of ways to implement good goverance.:
So internally there’s lots of things that we can do to have good governance. From an accounts payable point of view, it can simply be making sure that the bank details relate to the new supplier and not someone on the team. Or it could be having good O H and S procedures for making sure that your employees are safe. Having regular reviews for your employees in terms of their remuneration or their workday satisfaction is also providing good governance in your company. Some external ways of doing this is to get your company audited. And by that, I don’t mean getting the tax man in. I mean, simply getting an accounting firm in to perform an audit. And what they do is they come in and they look at your business. They look at the risks that your business is at for fraud. They look at generally how your business is performing and check everything.
The benefits of this is that a lot of banks, for example, will want fully audited accounts, not just financial statements, but audited financial statements, because what they’re getting from that is they’re getting confirmation from an independent person about the validity of the numbers. So that can be super, super useful when you’re going out and looking for funding for working capital or something else. But it is always great to get that bird’s eye view from someone else to say, “Well, am I doing things right? Am I doing things wrong?”
You also get from an audit review, the full list of basically your strengths and weaknesses. So you get lots of recommendations about how to do something better in accounts payable, or how to do payroll better or something like that. And it shouldn’t be seen as necessarily, “Oh my God, this is going to be terrible.” But more of a, “We can improve things and make the company stronger and better.” So it’s a big, scary word or topic, but I really think that it’s relevant to everyone at every level. And it’s well worth having to think about and discussing with your board of directors, which could be your partner because the two year directors in company or otherwise. But it’s well worth having a little bit of a think about it and going, what can we make stronger and what can we make better?
Thank you. And I’ll see you next time.