There's Never a Bad Time to Review your Internal Controls

There's Never a Bad Time to Review your Internal Controls

Michael Thilker, CPA, CITP, Manager
Posted by Michael Thilker, CPA, CITP, Manager on Sep 20, 2018 11:00:00 AM

StaffMeetAs a small business owner, it can be easy to neglect internal controls in your business. You’re running a small company, and you probably know your co-workers well. You may even hang out on weekends. However, that doesn’t mean that every employee should have access to all of your business systems, and nowhere is that more true than your accounting system.

Many accounting software packages have systems that make internal control easier for you as an owner. However, there are steps you can take on your own to keep your information safe:

  1. Limit Access to Systems

Make sure that employee only have access to the applications and data they need to do their jobs properly. Start with your computer network; each employee should have a distinct user name and password. Passwords should be at least eight characters and include letters, numbers, and special characters. The passwords should not be shared with anyone.

  1. Limit Access to Applications Within a System

Employees should only have access to what they will use. An Accounts Payable employee does not need to have access to payroll records and shouldn’t have that access. You can also limit employees’ abilities to perform tasks such as add new vendors to your system.

  1. Be Sure Employees Follow Procedures

Many accounting software systems include workflow monitoring tools that ensure that all your procedures are being followed. For example, you may want to configure your system so that purchases over a prescribed amount must be approved by higher level management.

  1. Monitor Data

Your business is always changing and evolving; that’s the nature of small business. It’s up to you to be sure that your systems are still working for you as you continue to grow. You can do that by monitoring your systems:

  • Analyze your financial statements to make sure what is actually happening is in line with your expectations.
  • Review your operational data to ensure that your metrics, including things like accounts receivable and inventory turnover, are being met.
  • Look to your system for suspicious activities like checks made out to cash or sudden pay raises for employees that you haven’t approved.
  • Set up criteria for what you would consider to be fraudulent activity, and then use your accounting software program to make sure that fraud is not occurring. This will alert you to suspicious activity and deter employees who know that constant monitoring is taking place.

Ultimately, it is up to you as a business owner to be sure your business is running without fraud. However, using the systems in place in your accounting software can make that job much easier.

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