03 Financial controls
Segregation of Duties in a 15 Person Company
The control matrix we install in small Canadian companies: who authorises, executes, records and reconciles, and what to do when you cannot split a duty.
What this covers
02Management reporting
The Reporting Pack We Deliver Every Month
One pack, the same shape every month, issued on a known date. This is what is on each page, where the numbers come from, and who maintains them.
A reporting pack is only useful if it is boring. Same pages, same order, same definitions, same date, so that the person reading it spends their attention on what changed rather than on where anything is. The pack below is the standard set we issue. It is built during the close and issued the day the period locks, which means every figure in it has already been reconciled and reviewed. Where a page needs a judgement call, the judgement is written on the page rather than left for the reader to reverse engineer. One person builds and issues this pack every month, and it is Khaled Hawari. That is the whole reason the same pages can arrive in the same order with the same definitions, because a pack assembled by whoever is free that week is a different document every time.
ScopeWhat the engagement covers
01Page 1: profit and loss by service line
The consolidated P&L sits at the top, and under it the same statement split by service line, with the current month, the prior month, the year to date and the same period last year. Direct costs are allocated by the rules set out in the definitions appendix, and allocated overhead is shown on its own line so that a line manager can see gross contribution before any allocation and after it. That distinction is the point of the page: a service line can look unprofitable purely because of how overhead was pushed onto it, and an owner deciding whether to keep a line needs to see both numbers. Where an allocation basis changes, we restate the comparatives on the same basis and note the change. We do not silently change the basis and let the trend tell a story that is not true.
02Page 2: balance sheet and working capital
The balance sheet is presented with the working capital block pulled out: receivables with an ageing profile, payables with an ageing profile, work in progress or unbilled, inventory where it applies, and the resulting net working capital figure with its movement for the month. Underneath sits the debt schedule, showing drawn and available facility, covenant measures where covenants exist, and the next twelve months of scheduled principal. Every line on this page ties to a reconciliation in the close binder, which is what lets us put a supporting schedule in front of a lender or an accountant on the same day it is requested rather than a week later.
03Page 3: the thirteen week cash forecast
This page is a rolling forecast, refreshed at every close against the week that just actually happened, so the first thing on it is last period's forecast compared to what really landed, by week. That comparison is the credibility test for the whole page: a forecast that is never scored against outcomes is a wish. Receipts are built from the receivables ledger by customer and by expected payment behaviour rather than by invoice terms, because terms and behaviour are different things. Disbursements are built from the payables ledger, the payroll calendar, remittance dates, debt service and known one-off commitments. Committed items and discretionary items are shown separately, so that when the trough gets tight the owner can see exactly which levers are actually available. Where the forecast shows a shortfall, the page names the week, the size, and the specific actions with dates.
04Page 4: variance commentary
Variance commentary is written, not verbal, and it is written before the review meeting. Every line past the threshold agreed with you gets an explanation traced to a transaction or a decision: a specific project slipping, a specific hire starting late, a specific price change, a specific one-off. Explanations that amount to timing get a stated reversal period, so that a timing claim can be checked next month. Where we do not yet know the cause, the page says so and carries the item as an open question with an owner, which is a far more useful thing for a decision maker to read than a confident sentence that turns out to be wrong. The commentary covers both the budget variance and the movement against the prior period, because those two frequently point in opposite directions and only one of them usually matters for the decision at hand.
05Page 5: the KPI page
The KPI page carries a small fixed set of operating measures with their definitions printed on the page, shown as a trend over at least thirteen months so seasonality is visible rather than confusing. Which measures appear is chosen with the owner during onboarding and then left alone, because a KPI set that changes every quarter cannot show a trend. The measures we most often end up with in a company this size are revenue per billable head or per crew, gross margin by service line, utilisation or realisation, days sales outstanding, days payable outstanding, the cash conversion cycle, backlog or committed pipeline, and headcount. Every measure names its source system, so that when a number looks wrong there is a defined place to go and check rather than an argument about whose spreadsheet is right.
06The definitions appendix, and why it is not optional
At the back of the pack sits a short appendix that defines each measure, each allocation basis, and each policy choice: what counts as revenue and when, what sits in direct cost, how overhead is allocated, how utilisation is calculated, how backlog is counted. It exists because most reporting arguments in a small company are not disagreements about the business, they are two people using the same word for different things. Once the definitions are written down and agreed, the arguments move on to the actual decision. The appendix is version controlled, and when a definition changes we restate the comparatives and note the change on the page it affects.
07How the pack gets used
The pack is issued on the day the period locks, and the review meeting is held the following day in a standing slot. We write the commentary in advance so the meeting is not a walkthrough of pages the owner can read alone. The agenda is short: the decisions the numbers force, the open questions from the commentary, the cash trough in the forecast window, and the follow ups from last month with their status. Every follow up leaves the meeting with an owner and a date and reappears on the next pack until it is closed. Where the company has a lender, an advisory board or outside shareholders, we produce the same pack for them rather than a second parallel version, with an added cover page. Two versions of the truth is how reporting credibility gets lost.
OutputWhat you receive
Deliverables
- 01The monthly pack as a dated PDF, issued on the close lock date
- 02The live workbook or reporting model behind it, so nothing in the pack is a black box
- 03Profit and loss by service line with allocated and unallocated views
- 04Balance sheet with the working capital block and a debt and covenant schedule
- 05A rolling thirteen week cash forecast scored against the prior forecast
- 06Written variance commentary with each item traced to a transaction or a decision
- 07A KPI page with printed definitions and a trend of at least thirteen months
- 08A version controlled definitions appendix covering every measure and allocation basis
- 09A running follow up log carried from meeting to meeting until each item closes
FAQAsked before signing
FAQ: Management reporting
We already get financial statements from our accountant. How is this different?
Year-end statements are prepared for compliance and arrive months after the period they describe. This pack is prepared for operating decisions and arrives within days of period end. It reports by service line rather than in total, it carries forward looking cash rather than only history, and it includes written commentary on what moved and why.
Can the pack use our own KPIs rather than yours?
Yes, and it usually should. We bring a starting set because most companies of this size have not defined theirs, but the measures are chosen with you during onboarding. The one rule is that once chosen they stay stable, because a measure that changes definition cannot show a trend.
Our data is messy. Will the service line split even be possible?
Not always in month one. If revenue and direct cost are not coded to a service line at source, the split is an estimate rather than a report, and we will label it as one until the coding is fixed. Fixing it usually means a mapping change in the ledger and a change to how invoices and timesheets are captured, which we scope in the first weeks.
Who else can we share the pack with?
Lenders, an advisory board, outside shareholders and your external accountant all take the same pack with a cover page rather than a separately built version. Where a lender needs covenant calculations in a specific format, we add that as a schedule rather than rebuilding the pack around it.
NextThe other engagements
04 Finance systems
Implementing the Finance Stack
How we select and sequence a finance stack: ledger, AP, payroll, expense, reporting, with cutover at a period boundary and a parallel run first.
What this covers
05 Fractional finance lead
The First 90 Days of a Fractional Finance Lead
What a fractional finance lead does in the first ninety days: diagnostic, cash discipline, a close that holds, and a finance calendar for the year ahead.
What this covers
Talk about the reporting pack we deliver every month.
Bring the last three periods and whoever currently touches the ledger. An hour is enough to tell you whether this engagement is the right one and what it would take to run it.