Internal audits are critical for evaluating a business’s financial health and ensuring compliance with regulations. But for many e-commerce and digital companies, staffing a full-time financial team isn’t always feasible. That’s where fractional controllers come into play. Fractional controllers provide high-level financial expertise on a part-time or project-focused basis, making them an excellent resource for companies preparing for an internal audit.
But what exactly does a fractional controller do during an internal audit? From identifying inefficiencies to improving financial processes, they play a pivotal role in helping businesses achieve clarity, compliance, and growth. In this post, we’ll break down their responsibilities and share why partnering with a fractional controller, like one from Fully Accountable, can be a game-changer.
Why Internal Audits Are Essential
Before we dive into the role of a fractional controller, it’s important to understand why internal audits matter, especially for e-commerce and digital businesses.
Key Benefits of Internal Audits:
- Regulatory Compliance: They ensure your business complies with tax laws and financial reporting standards.
- Fraud Detection: Audits catch discrepancies or suspicious activity early before they escalate into larger problems.
- Process Optimization: They uncover inefficiencies in your financial workflows, helping streamline operations.
- Investor Confidence: A clean financial record boosts credibility with investors and lenders.
While internal audits can reveal opportunities for improvement, they’re also incredibly detailed and resource-intensive. That’s why bringing in a fractional controller makes sense—they provide the expertise to guide you through the process efficiently and accurately.
The Role of a Fractional Controller in Internal Audits
Fractional controllers come equipped with deep financial knowledge and the ability to tackle complex tasks, without the need for a full-time hire. Here’s how they add value during an internal audit process.
1. Ensuring Compliance
The biggest priority during any internal audit is ensuring compliance with financial regulations and tax laws. Fractional controllers have a strong grasp of these requirements and help companies stay on track.
How They Help:
- Review financial statements and reporting to ensure they align with GAAP (Generally Accepted Accounting Principles).
- Verify tax filings for accuracy and confirm adherence to state and federal regulations.
- Identify areas where your financial processes may fall short of compliance standards.
Example: For an e-commerce company selling nationwide, a fractional controller could flag underreported sales tax liabilities in states where the company has established nexus, ensuring compliance before external auditors step in.
2. Identifying Inefficiencies
Efficient financial operations save resources and reduce long-term costs. A fractional controller brings an outsider’s perspective, spotting inefficiencies that may go unnoticed by internal teams.
Areas They Focus On:
- Operational Inefficiencies: Finding redundancies in expense tracking or reconciliation processes.
- Technology Gaps: Identifying outdated accounting systems that slow down audits or lead to errors.
- Mistakes in Reporting: Catching and correcting inconsistencies in your financial data.
Example: An e-commerce store using manual spreadsheets to track marketplace sales might receive recommendations from their fractional controller to integrate tools like QuickBooks or NetSuite, saving hours of weekly labor.
3. Strengthening Internal Controls
Internal controls are vital for safeguarding your business against fraud or costly errors. During an audit, a fractional controller evaluates existing systems and recommends improvements.
How They Contribute:
- Assess current controls to detect gaps, such as lack of segregation of duties or weak approval processes.
- Implement robust procedures, such as automated approval systems for large transactions.
- Train team members on best practices for preventing fraud and maintaining accurate records.
Example: A fractional controller might set up step-by-step invoice approval workflows for an e-commerce team, ensuring no single person can create, approve, and issue vendor payments.
4. Improving Financial Processes
Fractional controllers don’t just ensure compliance—they help your business achieve better financial health by optimizing processes.
Key Improvements They Drive:
- Streamlining Close Cycles: Shortening the time it takes to close monthly financials with efficient workflows.
- Implementing Automation: Recommending tools that automate reporting, reconciliation, or payroll management.
- Standardizing Reporting: Ensuring accurate and consistent reporting across departments or platforms.
Example: For a growing digital subscription business, a fractional controller might automate subscription revenue forecasting using tools like Stripe and data dashboards, providing clarity ahead of the audit.
5. Preparing for Auditor Questions
Navigating audit requests and questions can be overwhelming, especially if your team isn’t prepared. A fractional controller anticipates these needs, ensuring smoother communication and faster responses during the audit.
How They Assist:
- Create detailed documentation for auditors, such as organized expense reports or vendor contracts.
- Prepare your in-house team to handle common auditor questions without delays.
- Serve as a point of contact between your business and the audit team.
Example: An outsourced warehouse dropship business that manages inventory across platforms like Shopify and Amazon could rely on a fractional controller to reconcile product sourcing data, ensuring every expense is accounted for before auditors request it.
6. Delivering Insights Beyond the Audit
Once the audit is complete, a fractional controller doesn’t stop working. They deliver actionable insights to drive improvements across the business, ensuring long-term value from the process.
Post-Audit Contributions:
- Summarizing key findings and prioritizing recommended updates.
- Supporting ongoing compliance through regular reviews.
- Providing strategic financial advice to prepare for future audits.
Example: After conducting an internal audit, a fractional controller might develop an annual compliance plan for an e-commerce business scaling into new states, ensuring readiness for tax season.
Fully Accountable’s Fractional Financial Services
At Fully Accountable, we know that e-commerce and digital businesses face unique challenges when it comes to managing finances, and internal audits are no exception. That’s why we offer fractional financial services tailored specifically to your needs.
Benefits of Working with Fully Accountable:
- Expertise in E-Commerce: We work exclusively with U.S.-based e-commerce and digital businesses, so we understand the nuances of your operations.
- Scalable Solutions: Whether you need help during a one-off audit or ongoing financial support, our flexible services adapt to your goals.
- Enhanced Efficiency: From compliance to reporting, our fractional controllers bring efficiency and expertise to every financial process.
With Fully Accountable, you get peace of mind knowing your financial health is in expert hands, so you can focus on growing your business.
Let’s Talk
Internal audits don’t have to be a source of stress. With the right fractional controller, your business can turn the audit process into an opportunity for growth and optimization. From improving financial processes to ensuring compliance, their expertise ensures you’re prepared for every step of the audit and beyond.
Looking for help with your next internal audit or financial challenges? Contact Fully Accountable today to learn how our fractional financial services can set your e-commerce or digital business up for success.
