Growth requires more disciplined controls. As you grow, your accounting and internal control systems must keep pace to insure that the higher levels of income you generate are not wasted or siphoned off by various forms of dishonesty. Take a moment to think about anyone you know of that has suffered a loss due to embezzlement or poor internal controls. Was the loss severe? How could it have been avoided?
So it becomes increasingly important for both your internal accounting management and your auditor to be adequately qualified and experienced in implementing firewalls against various forms of embezzlement, shrinkage and other criminal activities.
Mission of internal controls To accomplish appropriate controls, consider:
Developing systems to maintain efficiencies and honesty on both the supply-side and the marketing side of your business. Supplied side risks include ordering procedures, incoming and outgoing inventory controls and accounts payable accounting.
Marketing-side risks include shrinkage (stealing by your customers and/or employees) accounts receivable mismanagement and sales not being rung up at the cash register.
Work with both your internal accounting manager and CPA to upgrade financial controls as needed. If you have uncommon risks beyond ones your accountants can install and administer, you might consider getting an assessment from a loss control consultant.
Financial reporting by profit centers. Your expansion should provide that your overall financial statements are broken down by individual profit centers within the company. As discussed under the section covering delegating authority, this practice will identify areas of strengths and weaknesses and also provide the basis for profit sharing incentives for key managers.
Learn more about key elements of successful Business Control System.
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