Financial Compliance Essentials for Growing Businesses

Growing any business is an exciting, but challenging time. Achieving and maintaining financial compliance is a legal obligation for all businesses, as well as being incredibly important for sustainable growth. Failing to remain compliant will not only lead to fines and legal issues, but also reputational damage. In this blog we are going to look at the importance of financial compliance for growing businesses, some key requirements, and advice on how to navigate this.

Why Financial Compliance Is Key During Business Growth

First, let’s begin by looking at the main reasons why financial compliance is important during a time of business growth:

1.    Protecting business integrity

When businesses grow, this often brings with it a whole new level of complexity, usually more sales, a greater geographic reach and potentially more stakeholders too. Financial compliance is key to ensure integrity within your financial practices, helping to maintain trust with not only customers but investors and regulatory bodies too.

2.    Avoiding legal penalties

Non-compliance can lead to severe fines, and in worst-case scenarios, even business closures and criminal charges. Breaches in anti-money laundering regulations can cost businesses millions and completely ruin a business's reputation. By staying compliant these risks are significantly reduced, allowing the focus to remain on growth.

3.    Enhancing stakeholder confidence

Anyone looking to invest in a business needs to have a clear understanding of how well finances are being managed, so demonstrating financial compliance can show that a business is well organised. This can help unlock funding opportunities with potential investors.

Key Compliance Requirements & Regulatory Frameworks

Let’s have a look at the main compliance requirements that all businesses need to adhere to. There may well be other regulations depending on the sector in which a business operates, but these are the key ones to be aware of.

1.    Tax Compliance

Governments across the world have strict policies when it comes to tax, and businesses must do the following:

• Register for appropriate taxes (e.g. VAT, Corporation Tax)
• File returns both accurately and on time
• Maintain digital documentation for audit purposes

  For UK businesses, staying compliant with HMRC’s Making Tax Digital initiative is another thing to be aware of, particularly as these thresholds change.
 
 2.    Payroll Compliance

 When growing a business this often involves the employment of more staff. It is therefore essential to ensure payroll is compliant, and the key obligations include:

• Deducting and remitting PAYE (Pay As You Earn) and National Insurance contributions
• Ensuring minimum wage laws are adhered to
• Reporting real-time information to HMRC for each payroll run

  3.    Financial Reporting Standards

 Transparency and accuracy are both incredibly important when it comes to financial reporting, and depending on the size of the business there are other standards that need to be adhered to:

• International Financial Reporting Standards
• UK Generally Accepted Accounting Principles 

4.    Anti-Money Laundering (AML) Regulations

 AML laws help to combat financial crime, meaning businesses have to do the following:

•  Conduct due diligence on clients
• Monitor transactions for suspicious activity
• Report suspicious transactions to relevant authorities

  Failing to comply with these AML obligations can result in criminal charges and therefore extreme reputational damage as a result.

5.    Data Protection

 With businesses increasingly turning to digital technologies, laws such as the General Data Protection Regulation (GDPR) overlap with financial compliance. Financial transactions need to be handled in a way that aligns with the GDPR, ensuring secure storage and limited access.

 There may also be industry-specific regulations that businesses should adhere to, for example financial services must adhere to FCA regulations, and healthcare businesses must comply with payment processing standards to ensure patient confidentiality.

 How To Ensure Compliance During Business Growth

Staying compliant while growing a business can seem daunting at first, but with a logical approach, it is easy to ensure nothing is missed. Here are some steps to take:

1.    Build a compliance culture

A proactive compliance culture begins with staff at the top of any business. Employees should be trained in the importance of compliance, and what to do if they notice anything out of the ordinary. Appointing a compliance officer is also a great way to ensure everyone stays accountable.

2.    Leverage technology for automation

Mistakes often happen due to human error, so by embedding technology into a company this can help with compliance. There are lots of different automated tax software to help with real-time tax filing, as well as payroll software to calculate deductions correctly. AML monitoring tools are also useful for detecting suspicious transactions.

3.    Carry out regular compliance audits

Regular compliance checks help to identify any weaknesses in current procedures, ensuring procedures remain robust and efficient. They also ensure businesses stay up to date on any recent changes in regulations. 

4.    Develop scalable policies and procedures

As businesses expand, operations become more complex. By creating standard operating procedures from the start, this can help ensure both consistency and compliance from staff as the business grows. These documents should be reviewed regularly to ensure they are still relevant during periods of expansion.

5.    Stay updated on regulatory changes

Regulations are always changing, so it is always a good idea to allocate a specific person within a business to monitor financial laws to ensure the business remains compliant. These changes can be industry specific, so partnering with industry bodies is a good idea.

6.    Ask for expert advice

There are compliance experts, like us at Wright Vigar, who are experts in this area and live and breathe financial compliance. We can help growing businesses navigate these complex regulations, helping with financial audits and even implementing systems to ensure a holistic approach. 

Remember that as businesses grow, financial compliance isn’t just a one-off task but something that needs to be regularly reviewed. By understanding the key requirements and seeking expert advice, the complexities of compliance can be easily navigated at the same time as operations being scaled.

If you would like to know more about how Wright Vigar can help with this, contact our financial compliance experts today.