subject: Internal Controls Help Businesses Run Efficiently [print this page] Internal Controls Help Businesses Run Efficiently
Businesses of all sizes will benefit greatly by establishing and sticking to a well prepared set of internal controls. These guidelines set out the business's ideal professional practices that employees from hourly workers to top executives are expected to follow. Internal controls are made to prevent losses as a result of fraud and human error. Accounting controls, administrative controls, and managerial controls are all necessary if a company is to run as smoothly as possible and at the same time keep their losses to a bare minimum.
Internal controls dictate the manner in which the accounting department keeps track of a company's financial activities and history. It is essential that an accurate report is kept; if not, a business could find itself in serious trouble. Financial loss due to large scale fraud has become a serious problem for some businesses; other companies have learned from their mistakes and are now implementing stricter accounting controls to prevent loss. Accounting controls include requiring that every transaction be reported accurately, that authorization to company assets is issued through the proper channels, and that bookkeeping records be periodically checked against existing physical assets to ensure accuracy.
All businesses have to be run efficiently in order to grow and prosper; both administrative and managerial controls ensure that operations are efficient. A company's internal controls need to allow for growth while also preventing wastes of time or assets. Internal controls enforce managers' directions and keep all employees working efficiently. Employee performance reviews and quality control reports let managers analyze the company realistically and make any needed adjustments in order to maximize efficiency.
Internal controls are vital no matter what size business you are dealing with. Take the example of a small business owner who opens a business with himself as the sole employee. Even in this case, financial records and all transactions have to be recorded properly. That allows them to care for taxes and other financial responsibilities without issue. When the business gets larger, proper management and financial records will be increasingly vital. If you are a sole business proprietor, you can buy more supplies you need out of pocket without any concern. Once the business has grown substantially, though, care should be taken to keep good records of every order made for additional supplies in order to prevent fraud and unnecessary expense.
Successful businesses rely on internal controls to manage both their finances and employees. Accounting controls ensure that all financial transactions are reported accurately and thus prevent loss; managerial controls keep everyone working as efficiently as possible. Every business, from small businesses to huge corporations, relies on these controls in order to maintain smooth and effective operations.
