Structuring Effective Controls Over the Five Primary Transaction Cycles

What’s Inside

Internal control over financial reporting (ICFR) is an integral element of every financial leader’s toolbox. Having the right controls, properly implemented, allows leaders to ensure that they have timely, accurate and complete financial information to make informed decisions.

The five primary cycles are universal, in that every organization has them. At the same time, every organization is unique in its exact processes and needs.

Weaver designed this guide as a roadmap to help any organization, regardless of industry, understand these cycles, the specific processes and subprocesses you need, and controls you can implement to manage your financial risks. It will also walk you through a step-by-step analysis of financial and operational risk and control considerations for the five primary cycles.

The Structuring Effective Controls documents include an overview, five chapters (one on each primary transaction cycle) and a downloadable risk–control matrix to go with each chapter. Organizations can use the guide and the downloadable tools to examine their own processes and customize controls for their operations, while eliminating what is unnecessary.

Key Points

Regardless of its industry, type or size, every organization has inflows and outflows: cash to be received, vendors and employees to be paid, investments to manage and financial data to report to lenders or regulators. These inflows and outflows create five primary cycles of transactions.

These are the five primary cycles every organization must control to be successful:

• Treasury and Cash Management (Chapter 1)
• Sales to Collection (Chapter 2)
• Purchase to Pay (Chapter 3)
• Human Resources and Payroll (Chapter 4)
• Financial Close and Reporting (Chapter 5)

Why It Matters

These five cycles may be simple or highly complex. You will have other cycles as well, such as inventory or property, debt and equity, plant and equipment (PP&E). But whether your organization has three employees or 30,000, whether you have one revenue stream or dozens, whether you are leading a multinational public company, a government agency, a start-up or a not-for-profit organization — implementing the right controls over these five transaction cycles lays the foundation for a well-controlled financial reporting environment.