All the companies regardless of its size needs to have financial controls policy, to provide proper guidance on the keeping of financial accounts, payments, and procedures that are related to the company's finances.
FREMONT, CA: Internal financial controls are mandatory for all small businesses. It will help to ensure whether the money is managed in a proper way or not. Without them, the companies risk employee fraud, cash flow shortages, or even bankruptcy.
Here are some financial controls every small business should have in place:
1. Keep business and personal finances separate.
Some people combine their business and personal finances, but it is the biggest mistake. People should never co-mingle personal and business finances. If you do make a loan to the business or take a loan from your business, document it appropriately.
2. Conduct background checks before hiring.
Before hiring people in the finance department, employers should conduct proper background checks before hiring. This is especially essential for employees whose job duties involve finances, such as accounting, payroll, bookkeeping, or handling cash.
3. Create monthly cash flow projections
To work in a proper manner, all the companies should create appropriate monthly cash flow projections. If in case the actual cash flow falls, the respective people must investigate and find the exact reason behind that.
4. Review the business’s monthly bank statements in detail
In order to get all the details on time, clients should review their business’s monthly bank statements in detail. All the clients must get their bank statements sent directly to their mails, registered mobile numbers, or home addresses.
5. Evaluate all credit and debit card statements for accuracy
To ensure more accuracy, people can review all their credit and debit card statements regularly. If all the people start using cards for business expenses, it will simplify accounting and tax preparation. But the chance of fraud will increase if more people will have company credit cards.
6. Monitor point-of-sale transactions
All the owners must count the cash drawer at the beginning and end of each business day. They should use point-of-sale software, which requires employees to log in, to track who is present in the office at any given time decreases the risk of theft.
8. Don’t assign one person in charge of petty cash
To put one person in charge of petty cash is the wrong decision. So it is necessary to appoint the second employee to authorize all petty cash transactions. Both the assigned people should record all transactions, and balance the petty cash once a week.
9. Review all outgoing payments
The other required thing is to check all the outgoing payments properly. The assigned person should compare payments to invoices, and also check the duplicate invoices, new vendors, or multiple invoices from the same vendor in a short time.
10. Check up on workers involved with the business finances
To discover misappropriation, employees must be sent for annual vacations, and someone else should be appointed to handle their duties.