The Importance of Internal Controls for Small Businesses

A woman embezzled $750,000 from a Christian supply store over only a year and a half. It was easy — she just wrote checks to fictitious companies and forged the signatures herself.  Could this happen to your business?  Of course it could, which is why even the simplest of internal controls are so critical for protecting your assets and minimizing your liabilities.

Here are 8 simple controls that if implemented and followed will save you a lot of money:

1. sign checks yourself
2. if you can’t sign checks yourself, authorize ONE other person to sign (but not a person that writes checks or has access to the check stock)
3. keep check stock under lock and key
4. approve invoices yourself
5. have cancelled checks mailed to your home rather than your office so that you can scan them to verify vendors and signatures
6. divide up processes for handling and receiving payments – different people should approve invoices, prepare checks, sign checks, and reconcile the checking account; in addition, different people should be handling incoming cash and checks, posting payments, and making deposits
7. if you take credit cards, looks for credits on the merchant statements as these could be going to an employee’s card
8. do background checks on all new employees

Photo by James Sutton on Unsplash