Chapter 6 Resources

Measuring Compliance With Code and AI

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Key Concept

What gets measured gets managed. What gets measured automatically gets managed well.

Continuous Compliance: Instead of periodic reviews that find problems months later, check every transaction against your rules as it happens.

Figures (Full Resolution)

Figure 6.1: Slack Notification

Slack Notification Real-time policy notification in Slack: Invoice #4847 flagged for missing business purpose. The team sees issues within hours, not months.

Figure 6.2: Compliance Dashboard

Compliance Dashboard The compliance dashboard showing status across all policy areas: documentation rate, approval compliance, vendor verification, and reconciliation status.

Downloadable Resources

Checklists & Templates

The Audit That Never Ends (In a Good Way)

Traditional compliance checking is periodic: – Once a month (if you’re diligent) – Once a quarter (more common) – Once a year (when your CPA reviews)

What happens between those checks? Problems accumulate. Small errors compound. By the time someone looks, there’s a backlog.

Continuous compliance flips this: Every transaction, every day, checked against your rules. Violations flagged within hours. Patterns detected before they become problems.

How Invoice #4847 Gets Monitored

When Invoice #4847 enters the system, here’s what happens automatically:

Check Rule Result Action
Vendor status Is vendor fully onboarded? ✓ Pass Continue
Amount threshold Does amount exceed $2,000? ✓ Yes Route to manager
Documentation Is business purpose provided? ✗ Fail Flag + notify
Categorization Is expense account valid? ✓ Pass Continue
Duplicate check Is this a duplicate entry? ✓ No duplicates Continue
Timeline Within 10-day documentation window? ⚠ Day 7 Warning

Total time: Under 2 seconds. Human involvement: Zero (until action needed).

The 5 Policies to Automate First

Start with high-impact, low-complexity policies:

1. Documentation Deadline

Policy: Business purpose required within 10 days
Rule: IF days_since(transaction) > 10 AND no_documentation THEN alert
Impact: Catches 80% of year-end scramble issues

2. Approval Thresholds

Policy: Expenses over $X require manager approval
Rule: IF amount > threshold THEN route_to_approver
Impact: Prevents unauthorized spending, creates audit trail

3. Vendor Verification

Policy: No payment to unapproved vendors
Rule: IF vendor.status != "approved" THEN block_payment
Impact: Prevents fraud, ensures 1099 compliance

4. Categorization Validation

Policy: No transactions to suspense accounts
Rule: IF account IN ("Ask My Accountant", "Uncategorized") THEN flag
Impact: Keeps books clean, reduces cleanup

5. Reconciliation Monitoring

Policy: Bank reconciliation within 30 days
Rule: IF days_since(last_reconciliation) > 30 THEN alert_owner
Impact: Catches errors early, prevents fraud

What the Compliance Dashboard Shows

A well-designed compliance dashboard answers these questions at a glance:

Category 1: Documentation

Metric Target How to Measure
Documentation rate >95% Transactions with business purpose / Total transactions
Average documentation time <5 days Days between transaction and documentation
Overdue items 0 Count of items past 10-day window

Category 2: Approvals

Metric Target How to Measure
Approval compliance 100% Approved transactions / Transactions requiring approval
Average approval time <2 days Days in approval queue
Pending approvals <10 Count of items awaiting approval

Category 3: Vendor Compliance

Metric Target How to Measure
Vendor W-9 rate 100% Vendors with W-9 / 1099-eligible vendors
New vendor processing <7 days Days from request to approved
Vendor verification rate 100% Verified vendors / Total active vendors

Category 4: Reconciliation

Metric Target How to Measure
Reconciliation currency <30 days Days since last reconciliation
Undeposited funds <$500 Balance in undeposited funds
For Review items 0 Unprocessed bank feed items

COA Monitoring: What to Watch

Your Chart of Accounts tells a story. These accounts should trigger alerts:

Account Target Balance Alert If
Ask My Accountant $0.00 Any balance
Uncategorized Income $0.00 Any balance
Uncategorized Expense $0.00 Any balance
Undeposited Funds Near $0 Over $500 for >7 days
Opening Balance Equity $0.00 Any balance (after setup)
Suspense $0.00 Any balance

Pro Tip: Set up a weekly report that shows balances in these accounts. If any show a balance, investigate immediately.

The QBO Scheduling Gap

QuickBooks Online is powerful but has one significant limitation: no built-in scheduling for automated checks.

QBO expects you to: – Remember to run reports – Manually review for issues – Follow up on problems yourself

The solution: External automation tools (n8n, Zapier, Make) that: – Pull data from QBO on a schedule – Run your policy checks automatically – Send alerts when issues are found – Create tasks for follow-up

This is where “policies that run” becomes reality.

The Human Role

Automation doesn’t replace human judgment—it focuses it.

What Automation Does:

  • Catches obvious violations (missing data, threshold breaches)
  • Flags patterns (unusual activity, timing anomalies)
  • Routes exceptions to the right person
  • Creates audit trail automatically

What Humans Do:

  • Make judgment calls on flagged items
  • Handle exceptions that require context
  • Approve or reject based on business knowledge
  • Investigate patterns that automation surfaces

The goal: Humans spend time on decisions that require judgment, not on finding problems that should be obvious.

Case Study: From Monthly to Continuous

Client: Healthcare services company, 30 employees

Before (Monthly Review)

  • Finance manager spent 8 hours/month reviewing transactions
  • Found issues 30-45 days after they occurred
  • 15% of transactions had documentation problems
  • Year-end cleanup took 40+ hours

After (Continuous Monitoring)

  • Automated checks run hourly
  • Issues flagged within hours of occurrence
  • 2% of transactions have documentation problems (caught within 10 days)
  • Year-end cleanup took 4 hours

Key Metrics Improvement

Metric Before After Change
Documentation rate 85% 98% +13%
Time to catch issues 30-45 days <24 hours -98%
Year-end cleanup 40 hours 4 hours -90%
Manual review time 8 hrs/month 2 hrs/month -75%

Operational Rhythm Calendar

Daily (Automated)


  • Bank feed sync check

  • New transaction policy evaluation

  • Approval queue monitoring

  • Alert delivery

Weekly (15 minutes)


  • Review compliance dashboard

  • Address any flagged items

  • Clear “For Review” in bank feeds

  • Check undeposited funds

Monthly (1 hour)


  • Complete bank reconciliation

  • Review COA monitoring accounts

  • Vendor W-9 compliance check

  • Run and review key reports

Quarterly (2 hours)


  • Full scorecard assessment

  • Policy effectiveness review

  • Process improvement identification

  • Team training on issues found

Key Takeaways

  1. Continuous beats periodic – Problems caught in hours, not months
  2. Start with 5 policies – Documentation, approvals, vendors, categorization, reconciliation
  3. Dashboard makes invisible visible – Compliance at a glance
  4. QBO needs external automation – It won’t schedule checks for you
  5. Humans focus on judgment – Let automation handle the obvious

Your Next Step

Pick ONE of the 5 policies to automate first. For most businesses, start with:

Documentation Deadline – Set a reminder to check for transactions older than 10 days without business purpose. Even a manual weekly check is better than finding out at year-end.

Want automated compliance monitoring? Apply for a complimentary Tax Ready Assessment – we’ll show you what continuous monitoring looks like for your business.

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