Financial Controls That Scale With Your Business

At $2M, the owner sees every dollar. Checks need signatures. Invoices get reviewed. The checkbook balance lives in the owner’s head. At $5M+, this breaks. Too many transactions. Too little time. Without controls, money disappears into inefficiency, waste, and sometimes theft.

Financial controls protect your business when you can’t personally oversee every transaction. They’re not about distrust. They’re about scale.

Why Controls Matter at Scale

Small businesses often operate with minimal controls. The owner’s oversight substitutes for formal systems. This works until it doesn’t.

Control failures at scale look like:

• Vendor invoices paid twice
• Employee expense fraud undetected
• Material theft from job sites
• Unauthorized purchases
• Pricing errors giving away margin
• Cash disappearing without explanation

The average small business loses 5% of revenue to fraud annually. For a $5M roofing company, that’s $250K. Most of it never gets detected.

Beyond fraud, weak controls allow:

• Operational inefficiency
• Margin leakage
• Cash flow surprises
• Decision-making on bad data

Controls aren’t bureaucracy. They’re protection.

The Control Framework

Effective financial controls operate on three levels.

Level 1: Preventive Controls

Stop problems before they happen.

Authorization controls:

• Who can approve expenses?
• At what dollar thresholds?
• What purchases require multiple approvals?

Segregation of duties:

• Person who orders shouldn’t be person who pays
• Person who receives shouldn’t be person who records
• Person handling cash shouldn’t reconcile accounts

Access controls:

• Limit system access to needed functions
• Password protection for financial systems
• Physical security for cash and checks

Level 2: Detective Controls

Identify problems quickly when they occur.

Reconciliations:

• Bank reconciliation monthly
• Credit card reconciliation monthly
• Accounts receivable aging review
• Accounts payable aging review

Variance analysis:

• Budget vs. actual review
• Job cost vs. estimate comparison
• Margin analysis by job type

Transaction review:

• Unusual transaction flagging
• Vendor payment patterns
• Expense report auditing

Level 3: Corrective Controls

Fix problems and prevent recurrence.

Exception handling:

• Process for addressing variances
• Root cause analysis requirements
• Corrective action documentation

Policy adjustment:

• Update controls based on findings
• Close gaps that allowed problems
• Communicate changes

Core Controls Every Roofing Company Needs

Eight core controls protect most roofing companies effectively.

Control 1: Approval Authority Matrix

Define who can approve what at what amount.

Sample authority levels:

Document the matrix. Communicate it. Enforce it.

Control 2: Purchase Order System

Require purchase orders before committing to expenses.

How it works:

• Job cost estimate generates material list
• PO created from material list
• Vendor receives PO with authorized signature
• Receiving matches delivery to PO
• Invoice matched to PO before payment

What it prevents:

• Unauthorized purchases
• Over-ordering
• Receiving errors
• Invoice fraud

Control 3: Check Signing Controls

Protect against unauthorized disbursements.

Standard requirements:

• Two signatures for checks over threshold ($2,500-$5,000 typical)
• Check stock physically secured
• Signature stamps prohibited
• Electronic payment approvals documented

Best practices:

• Review check register before signing
• Never sign blank checks
• Separate check preparation from signing
• Physical review of supporting documents

Control 4: Bank Reconciliation

Match your records to the bank’s records monthly.

Process:

• Complete within 10 days of month end
• Someone other than bookkeeper reviews
• Investigate all discrepancies
• Document resolution

What it catches:

• Recording errors
• Bank errors
• Unauthorized transactions
• Missing deposits

Control 5: Vendor Management

Control who you pay and why.

New vendor setup:

• W-9 collection required
• Owner approval for new vendors
• Verification of legitimate business
• Address and banking verification

Ongoing management:

• Annual vendor review
• Inactive vendor deactivation
• Address/banking change verification
• Duplicate vendor identification

Control 6: Payroll Controls

Protect your largest regular expense.

Controls:

• Segregate payroll processing from HR
• Independent review of payroll register
• Verify new employees exist
• Review overtime for reasonableness
• Reconcile headcount to budget

What it prevents:

• Ghost employees
• Unauthorized pay changes
• Overtime abuse
• Classification errors

Control 7: Inventory Controls

Protect materials from theft and waste.

Physical controls:

• Secure storage for materials
• Sign-out procedures for job materials
• Regular physical counts
• Comparison to system records

System controls:

• Track materials by job
• Variance analysis (estimated vs. actual)
• Return processing
• Waste documentation

Control 8: Job Cost Review

Ensure jobs produce expected margins.

Process:

• Compare actual cost to estimate mid-job
• Final cost review at completion
• Variance investigation for significant differences
• Pattern analysis across jobs

Thresholds:

• Investigate variances over 10% or $X
• Require explanation for all negative-margin jobs
• Track patterns by crew, job type, estimator

Implementing Controls Without Bureaucracy

Controls should protect without paralyzing operations.

Principles for practical controls:

• Focus controls on material risks
• Scale control intensity to dollar size
• Automate where possible
• Train people on why, not just how

Avoiding bureaucratic traps:

• Don’t require approval for trivial amounts
• Simplify approval workflows
• Trust but verify (spot-check rather than review everything)
• Accept some risk in exchange for efficiency

A $50 purchase doesn’t need owner approval. A $5,000 purchase does. Set thresholds appropriately.

The Monthly Financial Review

A disciplined monthly review catches control failures and guides decisions.

Review agenda:

1. Cash position: Balance, trend, projections
2. Receivables: Aging, collection issues, write-off candidates
3. Payables: Aging, payment plan, vendor issues
4. Revenue: Actual vs. budget, trend analysis
5. Margin: Gross margin trend, job-level analysis
6. Overhead: Actual vs. budget, variance explanation
7. Control exceptions: Any issues identified during the month

Time required: 60-90 minutes monthly.

Participants: Owner, bookkeeper/controller, operations manager.

Building Control Culture

Controls only work when people follow them.

Culture builders:

• Explain why controls exist
• Apply controls consistently (including to leadership)
• Respond to violations appropriately
• Recognize compliance
• Improve controls based on feedback

Culture killers:

• Inconsistent enforcement
• Leadership bypassing controls
• Excessive bureaucracy
• No explanation of purpose
• Punitive response to questions

Controls imposed without understanding breed resentment and workarounds.

Technology for Financial Control

Software amplifies control effectiveness.

Accounting software features:

• User access controls
• Approval workflows
• Audit trails
• Automatic flagging of anomalies
• Integration with job costing

Expense management:

• Photo receipt capture
• Automatic categorization
• Approval workflows
• Policy enforcement
• Integration with accounting

Procurement:

• Purchase order automation
• Three-way matching (PO, receipt, invoice)
• Vendor management
• Budget checking

Technology makes controls easier to follow and harder to bypass.

Signs of Control Weakness

Watch for indicators that controls need strengthening.

Red flags:

• Cash position surprises
• Unexplained variances recurring
• Vendor complaints about payment
• Employee discomfort discussing finances
• Missing documentation
• Single-person control of financial processes
• Reluctance to take time off (hiding problems)

Any of these warrants investigation.

When to Upgrade Controls

Control needs evolve with business size.

At $3M: Basic controls: approval matrix, bank reconciliation, check signing, monthly review.

At $5M: Add: job cost review, vendor management, payroll controls, segregation of duties.

At $8M+: Add: formal policies, internal audit function, enhanced technology controls, regular external review.

Match control sophistication to business complexity.

Start Here

Financial controls start with identifying gaps.

Start Here:

1. List your current financial controls. What prevents unauthorized transactions? What detects problems?
2. Identify your three biggest control gaps. Where are you most vulnerable?
3. Implement one new control this month. Start with the highest-risk gap.

Financial controls feel like overhead until they catch a problem. Then they’re invaluable.

Build controls that protect without paralyzing. Scale them with your business. Create culture that supports compliance. Your financial health depends on controls you can’t personally enforce through direct oversight.

This article is for educational purposes only and does not constitute financial advice. Consult with qualified financial and legal professionals before making business decisions.