How to Set Up Strong Financial Controls in Your SME (Even If You’re Still Small)

Financial controls may seem like something only big companies need.

But for growth-focused UK small and medium-sized enterprises (SMEs), they’re a necessity. Without proper controls in place, growth can lead to chaos. Implementing robust financial controls from the outset helps identify errors early, reduces fraud risk, and improves your business’s financial health. Even the smallest businesses benefit from building these habits early, long before they scale.

In this article, you'll learn:

• Why strong financial controls protect and strengthen SME growth
• How to set up simple, effective financial processes from day one
• When and how to scale your financial controls as your business grows

Let’s explore how your SME can build effective financial controls - even if you’re still small.

Why SMEs Need Strong Financial Controls

Financial controls regulate how money moves through your business, covering everything from expense approvals to reconciliation processes. Without strong controls, SMEs risk asset loss and costly errors.

Moreover, disciplined financial management enhances credibility, making your business more attractive to investors, lenders, and strategic partners. Once trust is lost through financial mismanagement or inconsistencies, it can be difficult (and expensive) to rebuild. Strong controls protect not only your finances but also your reputation.

This strategic approach to financial controls sets the foundation for sustained business growth and resilience.

Establish Clear Financial Policies Early

Even small businesses should establish clear, written financial policies outlining spending approvals, invoicing procedures, and payment collections. Clear policies ensure consistency and accountability across your team.

Late payments severely impact SMEs. In fact, 49% of UK business owners report customers regularly paying late. Implementing rigorous credit control measures, like clear payment terms, timely reminders, and consistent follow-ups, helps mitigate these risks. For example, a simple policy requiring a 50% upfront deposit on large projects can dramatically improve cash flow and reduce the risk of bad debt.

Similarly, inadequate cash flow forecasting contributes significantly to financial stress. Implementing a regular cash flow forecasting process, whether weekly or monthly, prevents unexpected shortfalls and supports strategic decision-making.
With your financial policies clearly defined, technology can help enforce and streamline them.

Automate Your Finance Function with Technology

Adopting digital financial tools significantly enhances financial control and efficiency. Cloud-based accounting software such as Xero automates transactions, highlights anomalies, and provides real-time financial insights.

However, adoption among smaller SMEs is slow. Only 58% of the smallest UK SMEs (0 to 9 employees) currently use financial software, compared to 84% of medium-sized SMEs. Without digital tools, businesses rely on manual processes, which are prone to error and inefficiency.

Businesses that embrace financial technology report high satisfaction, with 85% finding digital tools highly effective. Automation also provides long-term benefits. It reduces the risk of human error, enables faster reporting, and provides reliable data to support strategic decision-making. Over time, this helps business owners maintain greater control and transparency as they scale.

Of course, automation alone is not enough. You also need clear processes and safeguards to protect your finances.

Safeguard Your Business from Fraud and Errors

SMEs face increasing threats from fraudsters targeting invoice fraud and cyber-attacks. A 2024 Visa survey revealed that two in five UK SMEs lost money to fraud, averaging losses of nearly £4,000 per incident.

The UK Finance Annual Fraud Report 2025 highlighted both progress and continuing challenges in the fight against fraud. Despite efforts to improve prevention, total losses in 2024 exceeded £1.1 billion.

Preventive measures are essential. These include dual approvals for significant payments, separation of duties (such as separating cash handling from reconciliation), and regular internal and external audits. Regularly reviewing bank statements also helps detect fraudulent or erroneous transactions early.

With that being said, even the best fraud prevention measures depend on clear ownership and oversight.

Assign Clear Accountability for Financial Management

Establishing clear accountability is crucial. Research from Xero shows that 93% of medium-sized UK SMEs employ finance or accounting specialists, while only 37% of the smallest businesses do. Every SME should assign responsibility for daily bookkeeping and regular financial oversight, even if external support is needed.

Tracking key performance indicators (KPIs) such as revenue growth, profit margins, and cash flow is essential. However, many SMEs struggle in this area. A Chartered Institute of Management Accountants UK SME Survey 2024 found that one-third of UK SMEs cite difficulty in collecting and analysing performance data as a significant challenge.

Establishing routine reporting systems, such as monthly profit-and-loss and cash flow reports, provides consistent oversight and supports proactive financial management. Even something as simple as a monthly dashboard tracking sales, expenses, and cash reserves can make a big difference.

Regular accountability also reduces stress. This is significant, given that 27% of SME leaders lose sleep over financial worries, and 38% lack confidence in their financial management capabilities. Delegating oversight to trusted individuals or external experts helps reduce emotional strain and strengthens overall financial resilience.

Consider Outsourced Accounting Services as You Scale

As SMEs grow, financial management complexity increases. Hiring an in-house finance team can be costly and impractical at early stages. Outsourcing bookkeeping, payroll, or even remote Financial Controller services offers a flexible and scalable solution.

A 2024 study showed SMEs using external accountants achieved an average 11.5% revenue increase, with 80% of business owners reporting lower stress levels. Outsourcing not only improves financial outcomes but also overall owner wellbeing.

Common signs it may be time to outsource include struggling to keep up with bookkeeping, difficulty producing reliable financial reports, or needing support to navigate more complex tax or compliance requirements.

Take Control of Your SME Finances Now

Strong financial controls are not just an administrative task. They are fundamental to sustainable SME growth. Implementing these controls early positions your SME for future opportunities. Don’t wait until your financial processes become overwhelmed. Act now, creating scalable controls that adapt to your business growth.

Sanay specialises in virtual bookkeeping, financial controlling, and outsourced finance functions for businesses in all growing business sectors.

Contact us today and gain the peace of mind and clarity needed to focus confidently on scaling your business.