Create Basic Internal Controls for Your Business
by Angela Baca on January 24th, 2008
Congratulations, you’re a small business owner! That’s terrific news, but there is always something more to think about. For instance, if you have other people working for you, consider whether you have protected your business by creating internal controls.
The process of controlling your business’s assets by implementing controls is really not as hard as it sounds. Here you can explore four examples of how to protect your small business by creating controls using standard operating procedures. These protocols will help your employees to handle situations in which your business can potentially lose money. These situations include: cash handling, inventory, spending, and timesheets.
These four situations all sound fancy for small businesses. You can find them as commonplace in larger companies like grocery chains. However, cash handling, inventory, spending, and timesheet tracking are applicable to your own business. Even if you only have one employee, you can create a small procedure for each situation.
This discussion uses the example of a small gift basket business. You are the owner, and you have one clerk to help in your store. Here is how simple it is to create internal controls. Cash handling for your gift basket business is important. You need to explain to your employee how much should be in the drawer every morning, how much it should be counted down to at the end of the day, where to record the amounts of cash taken in during the day, where to deposit the cash, and where to return the drawer when the shift is over. Explaining these items has created a standard operating procedure for your employee.
In the next situation, you should maintain an inventory of all the baskets, gifts, and packaging supplies for your business. Train your employee to know where everything is stored and where to note what supplies are used for each business activity. For example, if you have a paper record for each basket to be made, your employee can write down the supplies that were used to make that basket. This simple method can also help you to track your costs later.
Spending is another important area where your employee can help you keep your costs down. If you have to keep a petty cash box and use your employee to run errands, he or she can sign out money from the petty cash box. Later, after making purchases, the employee can put the receipts and any leftover money back into the petty cash box. This simple procedure helps you to know where your money was spent even if you weren’t around. A petty cash log makes it even easier to track where the petty cash is spent each day.
The fourth situation is equally crucial. Ask your employee to keep a written log or punch a time clock for all hours worked. This record will help you with payroll management and employer taxes at the end of the year. The employee will also receive a measure of comfort that he/she will be compensated for all hours worked. Using a time card or other method of timekeeping is a great way to manage even one employee.
There are countless ways to implement internal controls in your business. If you take your business management ideas and turn them into procedures that employees can follow, you are making it easier for your employees to do their jobs. You are also setting them up to be more reliable and accountable. If they comply with your procedures on a routine basis, they are becoming more valuable to your company.
In the end, you and your employees have everything to gain from standardized procedures. As a business owner, your biggest advantage is to protect your business through implementing internal controls.
