Internal controls are processes and procedures that control your business. These are things that are done to make sure that the business is working the way it is and that no one employee or section of the business has too much responsibility. For instance, approving invoices and cutting checks should be two different processes so that no one employee can be making checks out to themselves. As your company gets bigger and bigger, you can add layers of control such as setting up a vendor on the accounts payable system will be different than the person who’s able to pay that person. This means in order for somebody to pay a fictitious vendor, two people would have to be involved. You can see the obvious protection for the business because we’re building redundancies in here and we’re not allowing any one employee to have way too much power over things.
That’s a simple internal control. There are many other controls you can put in place in your business, and you really want to get a financial expert involved. This is a great place for a growing business to bring in a fractional CFO, a part-time chief financial officer who will take control of these matters and make sure things are done properly. As the business gets bigger, you may want a full-time person in this role, but you as the owner still have to keep in touch with the CFO, watch over what they’re doing, and this may be where you use an outside accountant as a second check and balance. Make sure your internal controls are being run past two professionals to make sure that they are absolutely optimal. It’s very important that we have processes and procedures, not just for serving our clients, not just for running our day to day business, but to protect our assets and our business.
What’s been your experience with internal controls? Have you built these systems? What will you do differently in the future?
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer simone jackson.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at firstname.lastname@example.org or (214) 418-0258.