Organisational
Who does what. Roles, delegated powers, signing authority, cover arrangements. It answers the question: if a key person is absent, does the business stop?
Businesses · Governance
Adequate organisational, administrative and accounting structures
It is a legal duty for every business owner operating as a company or other collective entity, not only for large firms. In practice it comes down to one thing: being able to notice in time that something is not working.
01 · What the law says
A duty that applies to every company
The Italian Civil Code requires business owners operating as a company or collective entity to set up an organisational, administrative and accounting structure that is adequate to the nature and size of the business, and that also serves to detect a crisis and the loss of going concern in good time.
The law does not prescribe specific tools. It prescribes a result: the management body must be in a position to notice an imbalance while there is still time, and to act to remedy it. How that is done is left to the size and complexity of each business.
This means that an SRL (Italian limited liability company) with three employees does not need the procedures of a multinational. It does, however, need something: up-to-date figures, a cash forecast, a documented awareness of how the business stands.
The duty does not depend on exceeding any size threshold. It applies to the collective business as such, from the smallest SRL upwards.
02 · The three dimensions
Organisational, administrative, accounting
These are three distinct profiles, often confused with one another. Each answers a different question.
Administrative
How decisions are made and checked. Procedures for purchasing, for granting credit to customers, for authorising expenditure. It answers the question: do decisions follow a process, or do they depend on the person?
Accounting
Which figures are produced and how promptly. Up-to-date books, interim accounts, forecasts. It answers the question: when will I know that this quarter went badly?
In small businesses the accounting side carries the most weight, because it is the only one that produces quantitative signals. Bookkeeping brought up to date only at year end makes timely detection impossible.
03 · How it is done
What a small company really needs for adequate structures
The question that keeps coming up is: in concrete terms, what do I need to have? For a small business, the proportionate answer is this.
- Books kept up to date at least quarterly, not only at the close of the financial year.
- An interim profit and loss account and balance sheet, even a brief one, comparing the period with the previous one.
- A six-month cash budget, updated regularly: expected receipts, certain outgoings, tax and social security deadlines.
- Monitoring of tax and social security debts, showing any overdue amounts.
- An organisation chart, however minimal, with clear delegated powers, and a map of critical activities.
- Minutes recording the periodic check by the management body: without a record, compliance cannot be shown.
What is most often missing is not a sophisticated tool: it is the paper trail. Many companies carry out these checks in practice but leave no evidence of them. If challenged, what is not documented did not happen.
04 · What to monitor
The indicators to keep an eye on
The rules identify certain signals which, once exceeded, require the management body to act. They are alert thresholds, not automatic penalties.
| Area | Signal | Why it matters |
|---|---|---|
| Debts to suppliers | Overdue amounts above a certain proportion of those not yet due | It is the first indicator of cash strain to appear |
| Debts to banks | Exposures overdue for a significant period | It shows difficulty servicing debt from day-to-day operations |
| Tax debts | VAT not paid above set thresholds | VAT is third-party money: using it to run the business is a serious signal |
| Social security debts | Contributions overdue above set thresholds | The same mechanism, made worse by the liabilities attached |
| Going concern | Repeated losses, eroded equity | It affects whether the accounts can be prepared on a going concern basis at all |
The underrated signal
VAT used to fund day-to-day operations.
- It is money collected from customers on behalf of the State, not revenue of the business
- Putting off payment gives immediate relief and makes everything worse in the months that follow
- Above certain annual thresholds the matter also becomes relevant under criminal law
- It is the single indicator that most often comes before a full-blown crisis
05 · Who is liable
The consequences of an inadequate structure
The duty rests with the management body. It cannot be delegated to an outside adviser: the accountant provides tools and information, but responsibility for setting up and monitoring the structures stays with the director.
- The director is liable to the company for damage resulting from failure to set up adequate structures.
- In a crisis, the absence of structures affects the assessment of how promptly action was taken.
- The supervisory body, where there is one, has a duty to monitor adequacy and to report shortcomings.
- Periodic documentation of these checks is the only way to show the diligence exercised.
- In companies without a supervisory body, the checking function rests entirely with the directors.
The point is not to avoid a crisis, which may depend on external factors. The point is to show that you noticed it while it was still possible to act.
06 · First steps
Where to begin
If you are starting from scratch, you do not need to build a complete system in one go. This sequence covers the essentials in a few weeks.
Bring the books up to real time
Record transactions promptly instead of in quarterly batches. Everything else depends on it.
Build the cash forecast
A spreadsheet with expected receipts, certain outgoings and tax deadlines over six months. Updated every month.
Set a periodic check
A quarterly meeting of the management body devoted to the figures, with minutes.
Put roles and delegated powers in writing
Even a single page. Who signs, who authorises, who covers for whom.
Frequently asked
The questions that keep coming up
Does it also apply to a single-member SRL with one person working in it?
Yes, the duty applies to the collective business regardless of size. What changes is the proportion: for a minimal structure, up-to-date books, a cash forecast and a documented periodic check are enough.
Demanding formal large-company procedures would be disproportionate. Having nothing at all is non-compliance.
Can my accountant take on this duty in my place?
No. The duty to set up the structures belongs to the management body and cannot be transferred.
A professional can provide the tools, the figures and the method, and can support the director in the periodic check. The decision and the responsibility stay with the director.
Do I need dedicated software?
For a small business, no. A spreadsheet kept with discipline and up-to-date books cover the essentials.
Dedicated tools become useful as the number of variables to monitor grows: more business lines, more premises, different collection cycles.
How does this relate to the annual accounts?
The financial statements are a yearly snapshot, after the event. The structures are there to produce information during the year, while decisions can still change the outcome.
There is a direct link, though: the going concern assessment made when the accounts are drawn up rests on exactly the information the structures are meant to produce.
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An adequate structure fits the business as it is, not as it might ideally be
For a company with a handful of staff, a few tools kept up regularly are enough. "Regularly" is the part that is almost always missing.