What systems and controls do I need to put in place to ensure the proper operation of my company?
March 01, 2010
The major objectives of setting up and maintaining accounting and operational systems and controls are to:
Ensure that the assets and liabilities of the company are accurately qualified, quantified and are being accounted for in a reasonable and cost effective manner.
Determine if the existing strategies and controls are resulting in consistent profits and or expected results for the company.
The main areas to be considered for control in any company would be
1. Incoming Cash i.e. Cash Sales, Credit Sales, Accounts Receivable and its supporting documents
2. Outgoing Cash i.e. Cash purchases, Petty cash expenses, Accounts Payable and its supporting documents etc
3. Inventory controls i.e. Physical control of raw materials and finished goods , Receiving and issuing, Valuation of raw materials and manufactured goods
4. Administration i.e. Employee pay records, preparation and administration, Fixed assets control
Some examples of control measures in each of the above areas are as follows:
1. Use of sequential triplicate invoice books, preparation of daily sales reports. Recording of proper customer names on invoices, Checking of daily sales reports by supervisor, filing of invoices by customer etc
2. Use of cheque and petty cash vouchers for every payment, Management approval prior to payment, regular bank and cash reconciliations, filing of bills by vendor
3. Daily checking of physical stock, record of stock issues and receipts, proper security and storage.
4. Employee files, time keeping, fixed assets register.
These examples by no means constitute a complete list of control measures. One of the keys to the successful outcome of any business is to work with a good accountant in ensuring that all necessary and cost effective controls are put in place to ensure the protection of your business.