22/08/2021
(As published on the Botswana Guardian-Friday 20 August 2021)
POLICY & PROCEDURE-THE MISSING BLOCK IN START UPS?
Internal control is a critical function in any business. The primary purpose of internal control is to safeguard a company and its objectives. Internal control helps to protect assets, ensure compliance and adherence to regulations and rules.
One basic strategy of building up a robust internal control structure is to set up policy and procedure in the business. Business policies and procedure will guide operations and ensure that what is done is according to what has been agreed and laid down in our operations manual. Deviance from policy should accordingly attract relevant correctional procedures at all levels so that compliance is maintained.
Now I had a very interesting discussion with another entrepreneur this past week. His observation was that in most cases, we set up businesses and leave out policies from this infant stage. Our businesses then grow in staffing, capacity, turnover and eventually outgrow our operations .At this time it then becomes difficult to rope in business procedures. You will find that in most cases we have to rope in consultants to help us derive and implement business strategy including policies. The common defence is that at that earlier stage, these policies and procedures were not needed because the business was still small and in fact all critical decision making was centered on the business owner.Infact the entrepreneur at this stage is mostly consumed in crafting and executing their dream.
The bone of contention now becomes are policies important for business at its early stages? What are the pros of setting up good business models at start up stage? Ideally to better digest this, it will be easier to discuss common procedural breaches that exist in the early stages of startups, in fact two will suffice.
The first one involves recruitment and staffing. At early stages of the business, we all appreciate that finances are pretty much difficult. The common practice here is that recruitment and HR procedures are often compromised. The business will generally employ resources basing on what they can afford. Friends and relatives are often roped in to help under no contractual agreements. Equally, staff contracts and role objectives will generally be overlooked.HR conflicts often arise as the business grows and without policy, managing these is very difficult and the business is often at risk.
The second one is controls around cash and finances. Because most startups are personally funded, most entrepreneurs make the mistake that they can use the business finances easily for their own personal needs. There is normally no controls guarding cash handling and the owner’s personal expenditures. Often banking and cash records are hardly kept. The risk here is that it becomes difficult to assess comprehensively the business financial position and growth. Even when financial assistance is required, it’s hard to ascertain how much and funding justification becomes hard.
There are various other breaches that can be tabled but the prime objective of this writing is to stress that robust policy and procedure are very important at the early stages of startups. It now becomes paramount that business modelling is explored and policies set up. Implementing this will surely reduce the rate of startup failures to take off or crumbling at growth stages.
Phirinyane Moreri
Independent Service Consultant
Client Max Services
[email protected]