How to build a strong internal financial control system for your accountancy practice
Financial controls keep you and your clients protected. We show you how to build a strong financial control system.

Financial controls are policies and procedures that help you maintain the accuracy and integrity of financial information. These controls can include assigning software permissions to staff, setting up an approvals process, and creating clear audit trails.
Financial controls provide an extra layer of practice protection by preventing and insuring against errors and fraud. Having the right policies and procedures in place can help you meet compliance requirements, make informed financial decisions, and protect your practice and clients.
In this guide, we walk you through each step of building a strong internal financial control system so you can reduce risk and maintain compliance.
1. Understand and identify key risks
Financial controls should address key risks in your practice, so start by identifying what these are.
Conduct a risk assessment to spot vulnerabilities in your practice – analyse the policies, processes, and tools you’re already using for weak spots. Within your risk assessment, be sure to review financial reports for your clients and practice to spot discrepancies and anomalies in the data. No doubt your team will also have insights on practice risks, so make sure to check in with them so you have the full picture.
Some of the biggest risks for practices include fraud, regulatory non-compliance, and operational inefficiencies. In reality, this could look like an unauthorised person tampering with client records. Another example might be failing to have the right software in place to submit information to HMRC or Companies House. Even using manual processes for reconciling transactions can put you at risk of operational efficiency, especially since software can solve this for you.
Get clear on your risks first, so you can create targeted financial controls.
2. Establish a strong control environment
Preventing fraud, ensuring compliance, and protecting financial information is a team effort. Establishing a strong control environment requires practice-wide communication and commitment to policies and procedures.
Make sure your policies and procedures are stored accessibly and communicated frequently to your team. These policies should include clearly defined roles, responsibilities, and expectations of all team members. When you’re discussing compliance internally, be sure to highlight that it’s not only about your practice – it’s about protecting your practice.
Regular training is important, especially in cases where new software or skills are required. For example, if you automate bank reconciliation processes with software, your team might need upskilling.
A strong control environment gives the right people the right access at the right time. Software like Xero can help you achieve this with customisable access levels and permissions. This feature puts you in control of who can see and use data, and you can limit the number of people and level of access to reduce the risk of fraud.
3. Divide duties and assign tasks
Essential tasks like approvals, reconciliation, and payroll should be assigned to specific people so there’s a clear structure for delivering work.
In practice, this could look like using approvals software for client purchase orders and invoices, so these documents are sent to the right person for sign-off before you can make payments on their behalf. This means unauthorised purchase orders and invoices have less chance of slipping through the net.
When it comes to assigning individual tasks to team members, Xero’s practice management software makes it simple. You can create a job in Xero, assign it to a staff member, and get live progress updates as they deliver it. When you have the ‘administrator’ role in Xero, you’re in control of who has permission and what tasks they can complete.
4. Tighten up tax compliance procedures
At tax time, having all hands on deck makes the compliance workload much more manageable. But, getting the team involved must be done securely and efficiently.
Setting up your team with specific roles and permissions can help you manage the workload efficiently, while ensuring consistent quality. Xero software lets you customise roles and access levels so only certain people can complete specific tasks.
If you’re using Xero Tax, you can change the settings in Xero HQ so that tax roles are split into three levels – preparer, preparer and filer, and reviewer. This means your team can help you draft accounts and returns in Xero Tax (our product for tax preparation and filing) – but submissions can't be made without the correct permissions, reducing risk around incorrect returns being filed to HMRC and companies house.
This means you can send accurate, thoroughly-checked submissions to HMRC and Companies House, without having to do all the work yourself. It’s an added layer of control that keeps you and your clients compliant.
Throughout the year you’ll be recording transactions and reconciling accounts for your clients.
To save you time and ensure accuracy, Xero has a connected bank feeds feature which pulls in transactions from your clients’ banks automatically. Using this feature along with bank reconciliation predictions will help you speed up bookkeeping tasks further.
Xero also gives you clear audit trails to help you maintain transparency and accuracy. The history and notes report shows you changes to financial data – for things like invoices, bills, and inventory. So, you can track activity and provide evidence for auditors in a few clicks.
5. Use technology to simplify and strengthen processes
Creating strong financial controls isn’t something you have to do alone. Technology can help you simplify and strengthen processes effortlessly.
Accounting software solutions, such as Xero, can show your bank feeds and offer bank reconciliation predictions to speed up bookkeeping tasks, and help you maintain accurate records on behalf of clients. And, because data is imported automatically, there’s less risk of error.
Spotting errors, discrepancies, and fraudulent activity quickly can save your client a headache in the long run. Using analytics and reports to view profit and loss, balance statements, and account summaries can make these changes easier to identify. With Xero, creating reports is fast and simple – in fact, they’re generated for you, using your clients’ bookkeeping data.
Preparing sets of accounts and tax returns is critical, technical work. It’s also time-consuming, and if you’re manually copying data from bookkeeping software into a draft return, you risk making mistakes. Software can help you reduce the risk of error and speed up this compliance process. In Xero Tax, sets of accounts and tax returns are filled in automatically using client bookkeeping data. The right records flow into draft accounts and returns automatically, saving you time and ensuring accuracy.
But, beyond financial controls, Xero gives you and your clients financial clarity. Transactions are pulled in in real-time with bank feeds and you can get a live view of your clients’ cash flow picture. This helps with financial planning and enables you to support clients with timely and intelligent spending decisions.
6. Monitor and continuously improve controls
Regulations, clients, and your practice team are always changing – which means financial controls that work now won’t work forever.
Set a regular date for internal auditing and update your financial controls to make sure they’re still effective. Go through your policies to check they’re being followed diligently, and compare them with industry standards to make sure you’re meeting the mark. Reviewing your financial controls at a regular time is key, but you should also revisit them when you onboard new team members, take on complex clients, or in response to new legislation.
Data analytics and reports – like the ones found in Xero accounting software for practice management – can help you make continuous improvements. Here, you can view reports on productivity, time, and profitability. Easily spot where specific client tasks are costing you time and money, and use this information to drive change.
Internal financial controls also impact your clients, so make sure you communicate processes to them clearly and consider usability when you implement new tools.
Building strong financial controls is about more than managing risk – it’s about building trust with your clients. They’re relying on you to support their business, and by extension, keep their data safe. For more tips on building a healthy and sustainable practice, check out our accountant and bookkeeper guides.
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Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.