Accounting and Finance

When China Offices Go Wrong - How to Implement Effective Financial Controls

- Jay Boyle & Julie Yang, Expat CFO Services

The Need for Financial Controls

Many Chinese employees have worked for a State run company or SOE. In the old SOE model, the company was entirely owned by the state. Its primary function was to employ workers. Generating a profit was a much lower priority. The indifference toward profitability corrupted the company culture. Controls were weak, and company assets were often diverted to personal use or for personal gain. Although China’s private sector has undergone substantial development over the past two decades, the corrupt corporate culture is still prevalent.

When foreign corporations set up in China, many of their new employees bring this mentality with them from their previous companies. It is therefore imperative to take steps to change this outlook. Unfortunately in the chaos of a start-up, controls are often overlooked. Many companies in China do not even consider their controls until a significant loss occurs.

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