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Irrespective of size, businesses need financial systems to record and control business transactions, especially where money comes in or goes out of the business. System controls should prevent, or detect and correct errors as well as minimize the risk of fraud. You need systems for sales, purchases, payroll and, especially, for cash transactions.

 Credit sales to customers. There should be a clear link between credit limits, orders, issues from stock, delivery, invoicing and collecting debts. Supporting documents should be matched at each stage, so customers receive what they order, are correctly invoiced and ultimately pay. The system should keep track of what is owed by each customer and when they are expected to pay.

 Non-credit sales to customers. Non-credit sales will often follow the same system and controls, with instant payment recorded against the invoice.

 Cash transactions. Although the term ‘cash’ is widely used in finance, very few businesses actually handle cash. Even retailers have a large proportion of customers using payment cards. For many businesses the only cash will be petty cash. Nevertheless, wherever cash is involved, there should be tight controls and links to authorized supporting documents.

 Purchases of goods for resale and stock management. There should be tight controls over purchases, including a clear link to authorized orders and checks that goods or services have actually been received, before any payments are authorized. There should also be links to a stock management system, where applicable. There should be additional controls that purchases are made from approved suppliers at agreed prices. Purchasing systems should monitor payment due dates so businesses can take full advantage of supplier credit.

 Payments for expenses and capital expenditure. The same system and controls will often be used for expenses such as rent and utility bills. High-value capital expenditure will have additional authorization controls.

 Payroll. Payroll is typically the largest and most frequent expense and should have tight controls and segregation of duties. There should be links back to personnel records, authorized pay rates and, where applicable, timesheets. As an additional control the payroll system is often separate to the other systems.

You must record and control business transactions and maintain clear links back to authorized documentation.