Running a small business can be overwhelming at times. Many small business owners are at the point they have to depend on different people to perform the vital financial tasks that enable their business to function and thrive. This requires a lot of trust. Are the right people in the right roles, and are there enough controls in place to eliminate the possibility of theft and fraud? If this describes your small business, here are 7 simple internal controls that will help you examine your current operations and ultimately protect your business.
ONE. Sign your own checks. You have final say on all expenditures. If this is not feasible, then authorize only ONE other person who understands your cash flow, budgets, and strategy.
TWO. Keep your check stock under lock and key. It doesn't get any clearer than this. Keep the key with you at all times.
THREE. Approve invoices yourself. While it is best that you approve all invoices, If you can’t, choose someone different from the person writing/signing checks.
FOUR. Preserve cancelled checks. Have cancelled checks mailed to your home and review the checks, even if it’s just for 10 seconds.Ensure every check number is accounted for, signatures all match, etc.
FIVE. Divy up cash related activities. Do not put all your eggs in one basket. Have different people handle incoming cash and checks, posting payments, making deposits and reconciling the checking account. Your financial team should be growing with your business.
SIX. Review critical statements. Have detailed merchant account statement reviewed by someone other than the person who enters the transactions, and watch for credits.
SEVEN. Conduct background checks on all new employees. Having these checks as an element of your hiring processes is good business strategy. Most potential employees expect it, and it tells all that business integrity and security is important to you.
As your business grows, so will the need to delegate critical business processes to your employees. Following these basic internal controls will go a long way to safeguarding your financial strength and organizational health. Spending the time to create a system that works for you and your business is an important first step. From there, daily, weekly, monthly, quarterly, and yearly review will help you identify potential theft or fraud, mitigate the risks of mistakes, and course correct your financial team as needed. We can help you set up a system that works for you and your staff. Contact us today to learn more.