As discussed in the blog Stay ahead of the Regulations: Small Business Governance small businesses should try and implement robust policies and procedures that provide employees a framework of how to conduct business and remain compliant with regulators and the government. I doubt many small business owners and managers would disagree with the logic of implementing these measures, but they struggle to find the resources to establish and administer them.
The preparation work for implementing a more rigorous corporate governance structure within a small business should be done by management, in most cases by the owners of the business. They should decide on these key factors.
- Establishing company objectives.
- Mapping management structure and process.
- Developing processes for changes in control of the business and transactions involving large assets.
- Developing processes for establishing pay and other benefits to employees.
- Developing a process to handle the potential risks to the business.
- Identifying key areas of compliance – e.g. Government, shareholders, industry regulators.
- Establishing regular financial audits and disclosure of audit findings.
The next stage is to gain the necessary knowledge of corporate governance for the business. This can be done through external training or internal training by an expert or professional body. Corporate governance training should not be viewed as an expense but as an investment. Increasing knowledge within the business reduces risk and increases buy-in from staff, partners and stakeholders.
Every business should have their business practises formalised, this means that all aspects of the business should be analysed and a formal process should be documented. Each process should contain clear roles and responsibilities and should be communicated across the business to all staff.
The final stage is to set up an advisory board to continually assess whether the business is operating optimally. An advisory board should comprise of balance professionals dedicated to ensuring the integrity of financial data and holding management accountable for their actions.