Create Business Success by Creating Controls

Create Business Success by Creating Controls
The successful operation of a business requires control by
top managers and owners. This is true whether we're
talking about a large Fortune 500 company or a small
privately owned mom and pop business.

Policies and procedures are put in place to give top
management confidence that the company's objectives are
being met. These policies and procedures are called
Internal Controls.

There are 2 main types of Internal Controls - Accounting
Controls and Administrative Controls:

• Accounting Controls are designed to safeguard the assets
of the company and to insure that accounting records and
financial statements reveal reliable information.

• Administrative Controls are designed to insure quality
job performance by employees with regard to company
operations and compliance with all applicable laws and
regulations.

The ultimate purpose of Controls is to prevent errors and
fraud and to promote efficiency. Controls should help to
eliminate or reduce surprises and keep the company moving
toward it's goals.

Controls include a range of responsibilities such as:
approvals, performance evaluations, separation of duties,
account reconciliations, verifications, authorizations,
passwords, etc. They also include policies regarding
employee conduct such as personal phone use, harassment, or
safety while traveling on the job for example.

But we have to acknowledge that no system is foolproof.
It's possible that conspiring employees can cover up small
or large embezzlement, no matter what policies are in
place. Controls can provide reasonable, but never
absolute, assurance to management

When establishing Controls, companies are always limited by
the reality of resource constraints. Controls must be
monitored and checked by supervisors and managers. So the
benefits of controls must be weighed against their costs to
the organization.

While Internal Controls are made up of specific policies
and procedures, they should be thought of as an ongoing
process. They need to be reevaluated and updated on a
consistent basis to accommodate for internal changes such
as departmental growth.

Control activities should be promoted throughout a company,
from the top levels of management down to entry level
positions. Each employee's job description should include
the responsibility to communicate operations problems,
violations of the code of conduct, or illegal activity to
their superiors immediately upon observation.

The best way to insure that errors and fraud don't occur is
to hire the right people. Bringing in employees who are
competent, honest and believe in conducting themselves with
integrity, is the best way for owners or managers to sleep
well at night.

"The individual is the central, rarest, most precious
capital resource of our society." -Peter Drucker
(1909-2005)

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