Internal controls are policies put in place to prevent theft of, and damage to, a company's valuable assets. Tangible assets, such as real property, productive equipment, inventory and cash, can be a challenge to keep safe at all times, but familiarizing yourself with internal controls to manage tangible assets can help to keep your property secure.
Control access to key areas of your operations, such as inventory storage facilities, cash vaults and equipment rooms, with locks or security checkpoints. Electronic systems are available that allow you to restrict access to sensitive areas to designated personnel without using traditional keys. These systems have the ability to keep a log of which employees accessed specific areas at specific times.
Only delegate activities involving open access to inventory, cash and other valuables to your most trusted employees. According to Montana.edu, managers should not allow anyone to sign the manager's name when dealing with suppliers, distributors or customers, and should not allow any employee exclusive control of, or exposure to, delivery or cash-handling activities.
A disciplined attention to detail is vital for the security of your tangible assets. Thoroughly lock, gate and secure your premises after each working day, and utilize camera surveillance to record trespassers or suspicious activity. Make bank deposits frequently, and only keep as much cash on hand as necessary.
Record access to sensitive areas whenever possible. According to siterooms.com, access records are a key to effective internal controls. Keep an electronic record of access to restricted areas. Require cashiers to log into cash registers with a unique ID, and do not allow cash register sharing. Require employees to mark their initials on bank deposit receipts, delivery forms, cash register tapes and other control documents.
Perform regular and random audits of your inventory, equipment and bank accounts to catch suspicious activity early. Consider utilizing a third-party audit company to ensure the reliability of the audit results.
Do not allow employees to audit their own areas of responsibility. For example, do not allow an employee in charge of receiving deliveries to audit raw materials inventory, and do not allow the employee who makes bank deposits to audit the bank statements and cash register records.
The concepts and techniques mentioned above can aid in loss and damage prevention, but making your internal control policies completely transparent to employees, customers and business partners can serve to prevent occurrences from happening in the first place. For example, tell your employees that access to restricted areas is logged; let customers know that your premises are monitored by video surveillance; and let your suppliers know your internal audit policies.
- Photo Credit lock image by timur1970 from Fotolia.com
Examples of Internal Controls
Internal controls are policies and procedures companies use to help prevent errors and fraud, which can include theft, embezzlement, favoritism or math...
Examples of Internal Controls Tests
Internal controls ensure that all financial information represented on a company's financial statements is accurate and valid. Testing internal controls is an...
Effectiveness of Internal Control Over Cash
A company's department heads and segment chiefs implement internal controls and procedures in cash management systems to prevent theft or fraud. Effective...
How to Build an Inventory Control System
Inventory refers to a detailed list of the tangible assets of a business organization (furniture, machinery and work in progress). An inventory...
What Are Internal Controls of a Business?
Businesses rely on internal controls procedures to keep their employees honest and to feel confident regarding their company's assets and financial reporting....
A Summary of Tangible & Intangible Risks
Risks are unplanned events that can impact businesses in a significant and adverse way. Management must deal with risks every day, such...
What Are the Seven Principles of Internal Control?
When creating an accounting system, businesses and nonprofit organizations must establish a framework for internal control. The internal control process helps to...
Tangible Vs. Intangible Resources
Every business has various types of resources and assets, some of which are clearly visible and others of which are less obvious....
Are Employees Intangible Assets?
A company often has many types of assets it uses to create revenues and wealth in the business environment. Accountants are responsible...
Are Accounts Receivable Tangible Assets?
Thorough and accurate accounting is essential for a business to understand its financial position and for its leaders to make decisions about...
Audit Procedures for Fixed Assets
Financial statement audits are performed to provide reasonable assurance that an entity's financial statements are fairly presented in accordance with generally accepted...