Loss Control Techniques
Loss control is a function of risk management, whereby a business is trying to control the amount of risk to which it is susceptible in order to minimize the losses that eat away at its profits. During an audit of a publicly-traded corporation, the auditors verify and check loss control techniques in order to assure the shareholders that minimal losses are incurred. There are several techniques that a company, whether publicly-traded or privately held, can use to practice good loss control.
Other People Are Reading
-
Inventory Management
-
The most important component in loss control of a producer or distributor of goods is proper inventory management. As such, there are numerous software packages available which help management to produce documentation related to inventory and to keep a watchful eye on what comes in and what goes out. Documentation includes purchase orders, shipping documents, invoices, receiving lists and payment information. Periodically, the company should review all of the appropriate documentation to ensure that all inventory is accounted for.
Computer Controls
-
Another important component of risk management and loss control is the security of data and information regarding finances and inventory. For this, computer controls are essential to any business. Individual computers should have features which allow the user to disallow access by other persons to the terminal and important contents within the system, such as accounting software or inventory controls. Passcodes or key cards are good features to make practice of this level of security. The company should periodically test these controls to ensure that no breach of security has occurred.
-
Insurance
-
Insurance is directly related to both risk management and loss control. This component transfers the risk from the company to a third party who will foot the bill of a partial or full loss of funds because of the occurrence of certain events. It is important to make sure that the company has the appropriate amount of insurance. If it has too little, then the coverage may not adequately replace the money lost due to an unforeseen circumstance. If the company obtains too much, then it will overpay on premiums and reduce profitability, which is another form of loss.
Education
-
While education is probably the most frequently overlooked measure of loss control, it is extremely important. There are actually two reasons as to why this is such an important measure of risk management. First, it informs the staff that you are keeping a close watch on inventory and profits, which discourage irreverent behavior. Second, it educates them on how to keep track of inventory and data so as to prevent loss as well.
Operations Management
-
Operations management is extremely important to loss control and risk management. Aside from the property inventory management software programs, keeping the appropriate amount of inventory on hand, without excess, discourages theft. Operations management is also the primary source of purchasing the correct software systems, ensuring they are updated regularly and checking inputted data for human error periodically.
-
