Internal Control & Process Management2 min read
The first internal controls a growing business needs
Controls do not have to mean bureaucracy. A handful of simple ones prevent most of the problems small and mid-sized businesses run into.
When a business is small, the owner sees everything. Every payment, every customer, every purchase passes across one desk. That is a control, and a good one. The trouble starts when the business grows past the point where one person can watch it all, and nothing replaces that oversight.
Internal controls are simply the habits and checks that do that watching for you. These are the ones we would put in place first.
Separate the key duties
The person who approves a payment should not be the person who records it, and neither should be the one who reconciles the bank account. In a small team this takes some thought, but even splitting the work between two people closes most of the gap.
Set clear approval limits
Decide who can commit the business to spending, and up to what amount. Write it down. Unclear authority is how unplanned spending happens without anyone doing anything they thought was wrong.
Reconcile regularly, and have someone review it
A bank reconciliation done monthly and reviewed by a second person is one of the most effective controls there is. It catches honest mistakes and makes dishonest ones much harder to hide.
Control access to systems
People should have access to what their role needs and no more. Shared logins and former employees with live accounts are common, and easy to fix.
Keep the evidence
An approval nobody can find later did not really happen. Keep the supporting documents with the transaction, in a place more than one person can reach.
None of this needs new software or extra staff. It needs a few decisions about who does what, written down and followed. Start with wherever money leaves the business, and work outward from there.
