Designing a financial control framework 

Documenting your financial controls is critical, especially if they’re evolving as the business scales. To balance accessibility and depth, it’s helpful to create a tiered documentation system, prioritizing high-level control objectives tied to major risks in tier 1, and documenting specific control activities and detailed procedures in tier levels 2 and 3. 

Make sure you store documentation in a centralized repository and establish regular review cycles to keep documentation up-to-date as your processes change over time.

One of the key aspects of financial controls to include in your documentation is control ownership. In the scrappy start-up years, founders may manage many controls themselves. As your business grows, however, it’s helpful to expand control responsibilities across the personnel and departments available. 

At growth-stage businesses, Finance owns processes related to month-end close, revenue recognition, and bank reconciliations. FP&A are responsible for processes related to budget analysis, cash for forecasting, and financial metrics monitoring, while Revenue Operations take lead on contract management, opportunity pipeline forecasting. Finally, executive leadership retains responsibility for strategic risk assessment, board reporting accuracy, and control framework oversight.

Accelerating controls with technology and automation

Implementing the right technology and automation can make or break your financial controls framework. ERP systems, for example, are one of the foundational pieces of technology for financial controls, as they function as a centralized data repository and create a single source of truth for financial information. 

ERPs can also be used to enforce role-based access to financial information, a key component of preventative controls. As businesses scale their controls framework, ERP systems can power automations such as validation rules and continuous monitoring. 

In addition to ERPs, many growing businesses adopt technology solutions built specifically to support financial controls. 

One of the core tenets of financial controls is protecting risk, and as businesses leverage technology in their financial controls framework, it’s important to take steps to protect data security. 

Implementing access management protocols, for example, helps safeguard sensitive financial information and processes in ERPs and other systems. Teams can also encrypt financial information to keep data safe when it’s being transferred between systems. Finally, it’s best practice to maintain audit trails that keep record of system activities and changes to financial data.

Implementing technology to support your financial controls can require a significant investment. As you evaluate technology, prioritize investing in solutions that address high-risk areas. Additionally, ensure that the platforms you partner with can scale efficiently with your business. 

Beyond technology: Creating a control-oriented culture

Though leveraging technology and automation can certainly streamline your financial controls framework, all processes will be ineffective without a culture that prioritizes financial controls. 

Like many aspects of culture, establishing the importance of controls starts from the top. Executive leadership should lead by example with visible compliance, and integrate control metrics into business reviews. By framing controls as an expression company values, rather than a compliance obligation, leaders can increase buy-in to controls throughout the company. 

To design controls that the organization sees as protective, but not prohibitive, focus your framework on addressing specific risks, such as cash management, and leave flexibility in areas where risk may be lower, such as product development. You can also minimize the burden of controls by streamlining low-risk processes and approvals through automation.

How to avoid 4 common pitfalls in financial controls

Even well-intentioned finance teams can fall into common traps when building their financial controls framework. These pitfalls often stem from focusing too heavily on compliance requirements without considering the practical realities of operating a growing business. 

Understanding these common mistakes (and how to avoid them) can help you build controls that truly protect your business while supporting sustainable growth.

1. Under-controlling vs. over-controlling

While low levels of control expose obvious consequences, over-controlling can restrict innovation and agility, we can be equally detrimental to business growth.

Misappropriate levels of controls are often due to misalignment between controls and risk. High-risk areas, such as revenue recognition and cash management, should be protected with strict controls. Failing to do so would be under-controlling. Low-risk areas should have controls that don’t compromise agility and innovation.

2. Neglecting documentation

High-growth businesses inevitably experience personnel turnover and departmental change. It’s critical for financial controls to function consistently throughout these times. Failing to document your financial controls framework can lead processes to fall apart during periods of transition. 

Ensure that new and existing team members have the documentation and access required to operate financial controls during periods of organizational turbulence. 

3. Failing to test controls regularly

The only way to assess the performance of your controls is to test them regularly. Not testing your controls in private can result in them failing to protect against fraud and financial mismanagement in public.

It’s best practice to evaluate your controls at different levels of depth across different cadences. On a daily basis, you can run automated exception reporting and system-generated alerts. On a monthly cadence, you can perform reconciliation reviews. 

Targeted testing on high-risk control areas and cross-functional reviews can be performed on a quarterly basis, with comprehensive internal audits performed once annually.

4. Not adapting controls as the business evolves

Financial controls that work perfectly at $1M ARR may become completely inadequate at $10M ARR. Many companies make the mistake of implementing a controls framework and then treating it as "set and forget." As your business scales, transaction volumes increase, new revenue streams emerge, and organizational complexity grows—all of which require your controls to evolve accordingly. 

The key is building adaptability into your controls from the start: 

1. Schedule regular reviews of your control framework at key business milestones, such as doubling revenue or adding new product lines. 
2. Monitor leading indicators that suggest your controls may be struggling, such as increasing time to close books, rising exception rates, or manual workarounds proliferating across teams.

When adapting controls, focus on areas where business changes create new risks. For example, expanding internationally introduces currency and regulatory compliance risks, while launching usage-based pricing models creates new revenue recognition complexities. 

By proactively updating your controls framework alongside business evolution, you maintain protection without constraining growth.

Measuring the effectiveness of your financial controls

Without regular measurement and assessment, you won't know if your controls are working until they fail. Establishing clear metrics for control effectiveness helps you identify weaknesses before they become problems and demonstrates the value of your controls investment to leadership.

Here are five key ways to measure the effectiveness of your controls:

1. Control deficiency rates

Track the number and severity of control deficiencies identified during testing periods. A well-functioning controls framework should show decreasing deficiency rates over time. Monitor both the total number of deficiencies and their risk classification (low, medium, high) to understand whether your controls are improving or deteriorating.

2. Financial close cycle time

Measure how long it takes to complete your monthly and quarterly financial close processes. Effective controls should streamline rather than burden these processes. If close times are increasing, it may indicate that controls are creating bottlenecks or that manual processes need automation.

3. Exception and error rates

Monitor the frequency of exceptions in automated controls and errors caught by manual review processes. High exception rates might indicate that your controls are too restrictive or that underlying processes need improvement. Conversely, a complete absence of exceptions could signal that your controls aren't comprehensive enough.

4. Audit findings and management letter comments

Track the number and severity of findings from internal audits, external audits, and management letter comments from your accounting firm. A decreasing trend in audit findings indicates that your controls are becoming more effective at preventing issues before they're discovered by auditors.

5. Control efficiency and adaptability metrics

Measure both the ongoing operational burden and change agility of your controls framework. Track the total time your team spends on control-related activities, including testing, documentation, and remediation. While some investment is necessary, excessive time spent on controls relative to value-added activities may indicate inefficiencies or over-controlling. 

Additionally, monitor how long it takes to modify existing controls or implement new ones when business changes occur—adaptable frameworks should enable relatively quick adjustments without requiring extensive cross-functional coordination.

Regular measurement of these metrics, combined with periodic comprehensive reviews, ensures your financial controls remain effective as your business grows and evolves.

Building a scalable financial control framework is an ongoing discipline that evolves with your business. Teams prioritizing efficient growth treat their controls as a strategic advantage, not just a compliance necessity. 

By implementing the right mix of technology, documentation, and culture, you can create a framework that protects your business without constraining rapid growth. Effective controls should feel like guardrails on a highway: they keep you safe while allowing you to move fast. Start with your highest-risk areas, measure what matters, and keep adapting as you scale.