Four Internal Controls All Small Business Owners Can ImplementDecember 17, 2015
A complete and thorough system of internal controls will help you retain assets and protect the overall health of your business.
Sound internal controls give small business owners piece of mind, but let’s face facts—implementing certain controls can be very costly. The best control any business can have is to have certain duties segregated amongst employees. However, many small businesses simply cannot afford to hire all the employees necessary to achieve a proper segregation of duties. In addition to this, the national discussion surrounding the minimum wage increase may make it even harder for small business owners to hire all the necessary help in the near future.
4 easy and affordable controls
So, how can business owners cope with the high cost of implementing adequate controls? Here are four low cost solutions that all small and medium businesses should implement to strengthen internal controls:
- Have bank statements and credit card statements sent directly to your home. Review check images on your bank statement (or cancelled checks). Make sure it’s your signature on the checks and that you recognize the vendor.
- Make sure you have accounted for all of your checks- Investigate any breaks in the sequence of checks. Also, make sure the checks are locked in a safe and secure location.
- Become the last stop in the cash disbursement and cash receipts process. For disbursements, approve all invoices and sign all checks. Give another individual within your organization check signing authority only if you are not available. For cash receipts, review the aging periodically (I would recommend weekly) and approve bad debt write-offs.
- Review your balance sheet and profit and loss statement. Compare it to the prior year or expectations, and ensure that you understand any unusual fluctuations.
Inadequate internal controls can result in loss of assets, unreliable financial information, and ultimately—loss of business. It’s possible for dishonest employees to embezzle hundreds of thousands of dollars if the internal control system is weak in your business. The steps outlined above will protect you and your resources, don’t undervalue their importance!
For more information on internal controls, contact us.