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Internal controls and the small business owner
As you open the doors of your new business, the last
thing on your mind may be the potential for loss of profits through
employee oversight or theft - especially if you are the only employee.
However, setting up some basic internal controls to guard against future
loss before you hire others can save you headaches in the future.
Soon after you start making money and the world realizes
that they cannot live without your goods or service, you will probably
need to hire employees. Although necessary for your growing company,
hiring employees increases your risk of loss through errors, oversights
and theft.
I mplementing
internal controls to help you monitor your business can decrease the
need for constant supervision of your employees. Internal controls are
checks and balances to prevent fraud, limit financial losses and reduce
errors or oversights by employees. For example, the most basic internal
control concept requires that certain tasks be handled by different
people. This process, called "separation of duties", can greatly
decrease the probability of loss.
The following basic internal control checklist includes
suggestions that, once implemented, can help you and your employees
avoid concerns about fraud or theft in the workplace:
Have one person open the mail and list all the
checks on the deposit slip while another enters cash receipts in
your financial records.
Make sure someone who does not handle the checkbook
or purchasing is in charge of payments to suppliers and vendors.
Have your bank reconciliation done by someone who
does not have access to daily checkbook transactions.
Make sure that you approve all vendors and that you
count all goods received. Check all orders to make sure they are
correct and of the quality you intended. Sign each check and review
the invoice, delivery receipt and purchase order.
As your company grows, you may want to become less and
less involved with the day-to-day operations of the business. The
internal controls you put into place now will help keep the profits up,
the losses down, and help you sleep better at night. If you need any
assistance with setting up internal controls for you business, please
feel free to contact our office.
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