Discussions about internal controls often center on mitigation of risk, fraud and unforeseen cost. Yet, internal controls – when thoughtfully designed and diligently implemented – can increase organizational efficiency and save you money. Below are three ways that internal controls can boost efficiency and reduce costs for your organization.
- Utilize non-accounting staff – Often organizations believe it would be more efficient and easier to have one employee issue receipts, record, and deposit funds. However, we know that segregation of duties is an important step in internal controls. Being able to utilize administrative staff to perform certain duties, such as cash deposits or cash receipts, that are currently performed by accounting staff will help maintain the segregation of duties and save money. Another option is to have your board and committee members who are considered “financial professionals” perform review processes normally performed by the chief financial officer, if that skill set does not exist at the staff level.
- Risk assessment – By having a strong risk assessment process and plan, organizations can identify specific areas that present the highest risk, and design controls to assess those risks. By focusing on controls related to high-risk areas, organizations can direct those limited resources to address the highest risk areas, and work to limit or reduce controls in those areas not considered to be as risky. Having the proper controls in place over financial reporting is key for decision making. Assessing the risk within financial reporting is important for accurate, timely, and complete information to help plan, monitor, and report financial information.
- Understand your software capabilities – Many times organizations can increase the effectiveness and possibly reduce the cost of internal controls by relying on preventative controls and less on detective controls. One way to do this is by knowing and understanding the capabilities of your software. Most accounting and software packages have controls built into the systems and should be utilized rather than having individuals perform manual controls, which are subject to human error. Some functions that are currently being performed by staff may exist as automated steps that are currently embedded in your accounting package. Another way to increase efficiency is by using an import/export feature to automatically transfer data from one system to another to avoid the re-entry of data.
A successful system of internal controls is not built overnight. It is an ongoing process that often changes and requires consistent monitoring to understand the inner workings of an organization. Many organizations summarize internal control systems in manuals, so employees can easily refer to the organization’s policies.
Please contact Yeo & Yeo for questions regarding internal controls, internal control studies or fraud detection.