So, what is good governance and how does it apply to small businesses?
Broadly speaking, corporate governance describes the systems, processes and structures by which a company manages its business affairs and works to achieve its financial, operational and strategic goals. Effective governance embraces regulation, structure, best practice and board ability. It covers practically every sphere of management, from action plans and internal controls to performance measurement and corporate compliance. All of this can apply to small businesses as well as large organisations.
It sounds quite complicated so far – let’s break it down:
Good governance means complying with the rules that allow you to be in business. A business must meet all of its statutory and legal requirements. Business owners are also accountable to its customers, employees, suppliers and investors.
Strategy and change
Adhering to good corporate governance practices encourages managers to regularly review the company strategy and performance and seek external opinions where necessary. Bringing in external expertise to aid strategic decision-making can add significant benefits to the firm. Is there a need for change? If so, changes should be made effectively and efficiently to get the business back on track.
Good governance is about ensuring there is a good decision-making process used in the business. Do you have policies and procedures in place to ensure accuracy, consistency and responsiveness to your customers, shareholders and employees?
In a small business, this may be as simple as having some form of administrative support. A step up from that may be a non-executive Director. Regardless of the size of your business, good corporate governance is good for business because it encourages good decision-making.
If a new opportunity emerges in your business sector, having a robust decision making process in place can help your business change direction efficiently in order to drive the business forward.
Encourage open communication and be clear about what you are trying to achieve to your team. Whatever has been decided, have the confidence and trust that everyone is working towards achieving those objectives.
Managing risk and future-proofing the business
You and your team may be focused on growing client accounts and generating new business. This means there is a risk you could miss something. Good corporate governance practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance or licenses etc. An adviser on the management board will help you to remain accountable and focus on meeting these obligations.
Contact me if you’d like some help to improve your business governance, by email at firstname.lastname@example.org or call on 07970 314907. I will be delighted to help.