Strategic planning

Compliance management: Build a culture of compliance on your FP&A team

Updated: May 15, 2024 |

Billy Russell

FP&A Strategist, Cube Software

Billy Russell
Billy Russell

Billy is an expert in the FP&A space. Before joining Cube at the seed stage, Billy found success as a tax advisor at companies like Grant Thornton LLP and He holds a BA and MA in Accounting from William & Mary and splits his time between NYC and New England.

FP&A Strategist, Cube Software

Compliance management: Build a culture of compliance on your FP&A team

Ensuring adherence to laws, regulations, and ethical practices is not simply a legal necessity; it's an integral part of responsible financial planning and decision-making.

This guide offers insights into the key components of compliance management specific to finance and FP&A leaders.

From internal controls to data security standards, we'll explore how to build a culture of compliance that not only protects your organization, but also enhances its performance.

Let's begin.


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What is compliance management? 

Compliance management is the process of ensuring your organization operates within applicable laws, regulations, and standards. 

For FP&A teams, the key components of compliance management include:

  • Internal controls and company policies: Specific to financial planning, budgeting, and forecasting.
  • Accepted accounting practices like GAAP or IFRS: Ensuring the accurate and ethical representation of financial statements.
  • Local, state, and federal laws: Specific to finance and securities.
  • Tax and reporting compliance: Integral for precise financial planning.
  • Industry or regulatory standards: Specific to financial services and corporate finance.
  • Data security standards like CASL compliance or GDPR: Safeguarding financial data and analytical models.
  • Privacy standards like employee privacy: Especially significant when handling sensitive financial information.
  • Certifications such as ISO: Pertaining to financial management processes.

For FP&A teams, compliance accounting, tax, and contract compliance are all vital to the smooth operation of your accounting and finance systems.

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What does a compliance management system look like?

Compliance management usually starts with the internal policies and frameworks used to conduct business activities and operations ethically and responsibly. Strong compliance programs monitor activities and performance to ensure accountability. 

A comprehensive compliance management plan should include:

  • Policies clearly outlining internal procedures and processes
  • Training programs to ensure employees understand the importance of compliance
  • Documentation to track results and performance
  • Regular audit checks and compliance risk assessment
  • Software and technology to enable efficient monitoring

Who is responsible for strong corporate compliance?

Who in the company is responsible for upholding compliance? In a word: everyone. Compliant organizations infuse every aspect of their work with good documentation, strong regulatory adherence, and thorough compliance auditing to maintain the integrity of their practices and proprietary information. 

Executive teams are responsible for crafting policies around compliance. They set the standard for the company. But every employee and stakeholder has a part to play in adhering to compliant practices and documenting their activities to ensure accountability. 

A compliance officer with a focus on finance may interact with FP&A teams, helping to keep the organization up-to-date with current rules and regulations affecting financial planning and analysis.

What are the benefits of building a compliance management system?

Compliance for compliance’s sake is a great motivator, but compliance management has much to offer besides keeping companies within the letter of the law. Companies that lead with a strong compliance program often see these added benefits:

Better audit outcomes

A strong compliance program tailored to FP&A helps prepare for audits specific to financial planning, analysis, budgeting, and forecasting. With visibility into practices, companies can proactively address potential risk areas and ensure necessary documentation is available. This adds to the organization’s credibility and audit performance. 

A documented system of checks and balances makes it easier for auditors to review the organization's practices and verify that they comply with industry regulations. Compliance programs ensure that organizations are adhering to standards and help them build better relationships with regulators. These proactive steps demonstrate the company’s commitment to strong standards.

Lower organizational risk

A compliant organization is better equipped to respond to potential security threats and data breaches. With the ability to detect potential breaches quickly, the organization can take steps to mitigate negative impacts. With compliance programs, organizations can reduce their legal liability should a breach occur. 

Strong compliance also ensures alignment with financial regulations and helps in detecting internal threats that could impact the financial planning process. Companies with poor compliance and record keeping are likelier to suffer losses such as procurement fraud or bid-fixing from bad actors. 

More accurate financials

A strong compliance program offers accurate financial reporting for FP&A. Compliance programs define and enforce the rules around how financial data must be reported, ensuring all reports are in line with regulations and consistent across the organization. This improves the accuracy of financial information, which is essential to making sound business decisions and understanding the company’s performance. 

Reduced costs

Compliance programs help companies be proactive about their business practices. Since fraud and other criminal activities are more easily detected in a strong culture of compliance, companies avoid losses due to misappropriation of resources or non-compliance with regulations. It helps leaders gain a better understanding of their financial performance and the potential impact of any errors, allowing them to take appropriate measures before a problem escalates. 

Plus, the penalties for non-compliance get more expensive every day. Adhering to regulations helps companies avoid fines and reputational damage. As such, having an effective compliance program is key for companies looking to save money and stay ahead of any risks.

What are the top 5 compliance management challenges facing FP&A teams?

FP&A teams are busier than ever, handling more complex planning to navigate uncertain economic times and increasing regulatory demands. Weathering change is much easier when you build a transparent, modern financial compliance practice. 

Here are five key obstacles to solid compliance that companies should address as regulatory trends change: 

  1. Poor visibility: Gaps in organizational awareness about internal practices, current regulations, standards, and protocols diminishes the effectiveness of your compliance efforts. It increases the likelihood of teams or individuals operating outside of compliant methods. It causes confusion with relevant laws and regulations set forth by government bodies or other entities.

Lack of visibility can also create a situation where the team does not have an accurate understanding of the company's compliance status. Without proper visibility into compliance efforts and issues, it becomes difficult to identify potential problems early on and take corrective action when needed to mitigate financial loss or reputational damage.

  1. Changing regulations: Organizations must continually update their internal practices to stay compliant with the changing laws and industry regulations. Keeping track of the changes can be overwhelming and difficult to manage. Without a good compliance policy in place, it’s even harder.

A good compliance policy helps organizations stay on top of change management. It also allows them to have plans in place for adopting updates or revisions. Additionally, having clear policies facilitates better communication across teams and departments which further enhances compliance management efforts.

  1. Lack of reporting: Organizations with poor or inadequate reporting processes have more difficulty maintaining and proving financial compliance. Without regular reporting, it can be difficult to identify irregularities in the financials or departmental processes. Regular, consistent tracking of metrics and compliance activities makes it far easier to maintain compliance and conduct audits.

  2. Siloed data systems: The data sources of a growing organization are numerous, holding a wealth of information for reporting and improvements. But if your systems don’t talk to each other, all that valuable data may be wasted. Siloes make it hard to identify relationships between departments and how they affect the overall compliance of the organization. When departments rely on different software tools for methods, it creates discrepancies in how they track information or what metrics they use to measure compliance. This further hinders visibility and action.

  3. Manual processes: Manual processes increase the risk of compliance failure in several ways. Financial reporting can be especially complicated given the numerous steps and rules required to accurately report financial data. Without software automation, even high-performing teams may introduce errors that affect the financials. It also makes it less likely suspicious or abnormal trends will get spotted. 

7 ways compliance managers can ensure compliance in their organizations

Compliance is multi-faceted, and strong programs thrive due to a positive compliance culture, good data, well-defined policies, and sufficient support. 

When building or improving your compliance programs, use these best practices to strengthen and fine-tune compliance management:

1. Identify compliance goals

When building or refining a compliance program, it can be difficult to know where to begin. Establishing a compliance roadmap helps identify high-priority goals and methods to achieve them.

A compliance roadmap should outline the specific steps needed to ensure that all financial activities align with relevant laws, regulations, and ethical standards. It would begin by identifying high-priority goals, such as alignment with regulations, risk management, and adherence to ethical guidelines.

To achieve these goals, the roadmap would detail various methods, including regular compliance audits, targeted training and education for team members, and the integration of technology that adheres to compliance requirements. It would also provide clear timelines and milestones for implementing these methods.

This roadmap guides the FP&A team in making informed decisions and providing a clear direction, which in turn helps avoid penalties and builds trust with stakeholders. This framework also provides a reference point for tracking performance and progress, developing strategies, and finding solutions to any challenges. It gives everyone involved a shared understanding of internal priorities and builds a culture of compliance at every level.

2. Establish compliance metrics

Identifying compliance metrics for FP&A activities helps track the success of your program. Compliance metrics help to establish clear benchmarks to measure performance, prevent discrepancies between actual results and forecasts, and ensure compliance with relevant regulations. By having established metrics, organizations can also quickly react to changing circumstances or compliance requirements, allowing them to remain agile and compliant with industry standards.

Developing KPIs

When measuring financial compliance success, key performance indicators (KPIs) are essential for tracking progress. Common KPIs FP&A teams use to track performance include:

  • Time to discovery: How long it takes for an issue to come to light through reporting or audits.
  • Time to resolution: The amount of time from discovery to resolution. 
  • Cost of regulatory compliance: The total cost (including wage hours, compliance software, reporting, and auditing costs) of maintaining a compliance standard.
  • Compliance expense per issue: How expensive, on average, it is to resolve a compliance issue.
  • Post-audit issues outstanding: The number of compliance issues yet to be resolved once discovered during a compliance audit.
  • Composite risk: A numeric estimate of risk severity. 
  • Risk severity gap: Actual versus projected risk exposure. 

Tracking these KPIs over time lets organizations identify variances from expected results and areas for improvement. 

3. Document policies

To maintain compliant practices, people need to know the rules and guidelines. Once your program is outlined and goals stated, document your policies and procedures. Create easy access to these resources for issues or questions, and return to these policies as needed to update and streamline your practices. 

4. Build compliance training

In addition to documentation, create training resources for staff that outline the procedures and rationale for certain compliance processes. Include training for any software tools they will use when conducting compliance activities. Offer training in multiple formats (written, video) if needed to ensure everyone can learn in the way that best supports them. Establish a point of contact for questions or issues with training or policy. 

5. Lead from the top

Leadership teams must emphasize the importance of compliance and promote a culture of compliance within their organizations. They should set an example by demonstrating compliance as a priority in all activities, strategies, and decision-making. Leaders must also be aware of the regulations applicable to their industry and invest in resources to ensure the team complies with all relevant regulations. This encourages employees to take ownership of their roles in maintaining regulatory standards. 

6. Adopt a reporting structure

Tracking and reporting on compliance activities is essential to maintaining the high performance of your program. Regular audits, checks, and reviews ensure that all areas of compliance are being met. It also makes it easier to identify improvements and implement them.

Additionally, employees should have access to an escalation process that allows them to ask questions or report any incidents of non-compliance. This lets organizations quickly and efficiently address issues.

7. Improve procurement practices

Procurement is a major contributor to cash inflow and outflow in a company. As such, improving your procurement and business functions go hand in hand with improving internal and external compliance. Strong procurement practices such as approval workflows, strategic sourcing, vendor compliance track, and spending guidelines reduce the chance of issues like vendor fraud, internal issues, data security controls, and accounting errors.

Conclusion: compliance is the key to continued success

Compliance management stands as a cornerstone of success and integrity. It's a continuous journey, one that requires vigilance, commitment, and a proactive approach. Embrace it, and your organization will reap the benefits for years to come.

Want to learn how Cube can help you continue to build a culture of compliance? Request a free demo today.

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