Internal controls are procedures a company puts into place to monitor and perform checks and balances on its methods and procedures. These safeguards are meant to protect the assets and resources of a company. The controls establish a separation of duties to deter fraud and theft as well as establishing accountability for certain job responsibilities. They are meant to help a company reach its goals.
Determine what area of your business needs to be monitored and protected. Determine where possible risks exist. Develop a strategy for identifying risk within the accounting field. Cash, accounts payable, inventory and company credit cards are possible areas of potential risk. Audit these accounts regularly to deter fraud.
Establish separation of duties involving your cash. For example, the person who is responsible for handling the cash should not be the person to count the money at the end of the day. The person entering invoices and bills should not be the person paying them. Create separation of duties so there is peer accountability.
Institute tailored access to accounting information systems. Provide employees access to the areas of the system that are required for their work. Do not give them access to everything. This will prevent employees from entering delicate areas without permission. Institute a log-in system so the administrator can see where an employee goes inside the system.
Institute a checks-and-balances system for reconciling bank accounts and verifying all invoices before they are paid. Do not complete a check run without first verifying the billing amounts. Be sure transactions are coded to the time in which they occurred. Start verifying individual accounts to determine their accuracy.
Institute a system for easy compliance tracking. Ensure that all of your compliance issues are handled and that the responsibilities are divided between a number of people. Put standards in place to adhere to Securities and Exchange Commission requirements and federal and state tax laws.