We have always run our back-office on trust, but we know buyers will look at our financial controls. How do we establish a rigorous internal controls framework during our exit runway without slowing down our daily operations?

Question

Tyler Smith · Accepted Answer

Running a business on trust is an operational hazard that buyers will quickly exploit during due diligence. A lack of formal internal controls signals financial risk, which can lead to a lower valuation multiple or demands for a larger indemnity escrow. You must protect your business by building a professional financial foundation.

Start by separating key financial duties on your Accountability Chart. No single employee should have the authority to initiate, approve, and record financial transactions. Ensure that the person who manages accounts receivable is not the same person who reconciles your bank statements.

Next, formalize your approval policies. Document clear thresholds for expenditures, requiring dual sign-offs for payments above a certain dollar amount. These rules should be integrated into your core financial processes and reviewed regularly.

Establishing these controls does not have to create bureaucratic gridlock. Use your EOS® tools to keep things streamlined. Write simple, clear policies for your financial workflows and make sure your team is trained on them. Review any compliance exceptions during your weekly Level 10 Meeting™ as part of your normal operational discipline.

By professionalizing your internal controls on your runway, you protect your company from internal fraud and prove to potential buyers that your financial reports are accurate and trustworthy. This operational maturity reduces their perceived risk, giving you a stronger position when negotiating your final deal terms.