What is Compliance?
Compliance is nothing but following rules and regulations made by several legal authorities. Sometimes, it is very difficult to follow each law and act according to it but not obeying those laws may also result in missing various opportunities that come along. Simple examples of compliance include obtaining a business license in your town and paying your taxes on time.
Businesses are not only required to obey the external laws and rules but also it should follow internally designed business policies for the betterment of the business. Requirement for compliance increases with as the businesses grow. So, the businesses should also keep changing compliance procedures along with the changes in the external and internal environments. This will help them grow smoothly without any intervention from regulatory authorities.
Requirement to obey legal laws and follow company policies may vary from business to business. Following and acting responsibly in the legal and ethical environment can add value to the organization and which in turn will save a lot of time, effort and cost.
Why is compliance important?
A timely compliance with all the relevant laws, regulations and policies can benefit the organizations by keeping things running smoothly, reducing fines & penalties and also maintaining its position in the industry. Some of the benefits are discussed below :
Higher Employee retention :
Employees have a tendency to switch the workplace if they find any complaints or issues working in the present environment. With an effective internal compliance where there is safety, employee benefits and compensations, a positive work environment is developed. This positive work environment attracts the employees to work and add to the value of the business.
Reduced legal charges :
No business wants to suffer the results of not complying with various laws and legislations. Complying with those laws will decrease the risk of fines, penalties, lawsuits or also shutdown of the business. There are so many regulations related to how employees should be managed, how products should be manufactured, how buying and selling should be done, how the business should contribute to the society, etc. Obeying them all is the great challenge but if achieved, reward is reduced fines or penalties and greater market share.
Competitive advantage to the businesses :
The business which follows all the rules and regulations and also has strict internal policies have a competitive advantage over those businesses which have not complied with the requirements timely. Government authorities, stakeholders, employees and customers are attracted to such businesses which strictly follow the compliance and prevent any kind of improper and unethical behaviour.
Better public relations :
The success of the business depends a lot on its public image. When an organisation starts facing court cases or any government interventions, the market or customers start losing trust in it and this will lead to a negative financial impact. Compliance will ensure that a company maintains its public relations and holds a positive image.
Types of compliances
External Compliance refers to following the rules, laws and standards set by the governmental authorities to avoid any negative impact on the goodwill of the organization. These laws are made to help an organisation build public relations, trust and bring transparency to the business it does. Complying with all the laws ensures any unnecessary duplication of efforts of resources. Some of the broadheads can be categorized as follows :
Internal Compliance :
Internal compliance refers to internally designed set of rules and regulations which the owners, employees, traders, customers follow to maintain the quality of the services or products provided by the organisation. An organisation will comply with external requirements only when it is working in line with the internal rules and regulations. Some of the broad heads can be categorized as below :
An example to internal compliance is when the accounts departments follows the company’s policy and reconcilies cash and bank accounts at the end of every month and reports to the internal auditor.
An example to external compliance is when statutory audit of the company is done by the due date provided by the companies act.
What does Analysis means?
Analysis is all about finding problems rather than solutions. One can examine data and facts in depth to understand the issues and then provide the basis for problem solving or decision making.
In its business terms, analysis involves communicating complex technical details in easy-to-understand language to stakeholders and employees. Every business has its own goals and objectives to achieve which is only possible if the businesses are able to analyse different aspects of businesses in detail. Analysis of different aspects are required to measure the effect of any negative impact.
Every business small or big requires a 360-degree evaluation of all areas to know the core and non-core areas. This analysis of core and non-core areas will help the organization to invest adequate amount of resources and help the businesses to achieve long term objectives and goals. In general terms, businesses should analyze their cost, performance of the employees over different years and departments, performance of the products in the market, their cash movements and many other areas and focus on significant areas to achieve their long term goals.
Types of analysis
There are number of analysis which businesses can do using the facts and figures available to provide a picture of the present position in the market and also to provide ways to enhance the business internally and externally. These are some of the following types of analysis which can help businesses understand the core problems and areas to focus and resolve them at the earliest :
- SWOT/TOWS Analysis
- ABC Analysis
- Variance Analysis
- Ratio Analysis
- Cash Flow Analysis
- Financial Statement Analysis
- Profitability Analysis
- Pareto Analysis
Under Pareto Analysis,if we do an analysis of how profitable each of our customers are. Often, the results will surprise you, because the biggest customers can often be less profitable than thought. This analysis will help to achieve the profitability goals.