The goal of internal controls is to provide check and balances that help produce or eliminate errors and fraud in financial reporting. In large companies, financial reporting is divided among several departments and many people. With small businesses, it's very common to fine one person is in charge of making deposits and completing financial records. This amount of control by one person can increase the risk of a problem occurring.
To be safe, don't let one person control an entire process, whether it's accounts payable, purchasing, receiving or check signings. Secondly, owners should frequently review major areas of risk. Some suggestions are:
- Periodically check orders for quality, quantity and accuracy.
- Sign each check and company paper work
- Monitor other areas, such as travel and entertainment and make sure the expenses are in line.