Restrictive? Hardly. 6 Ways Good Business Controls Benefit Your Company
In a swift and dynamic environment where business is often conducted at our fingertips, maintaining transparency is essential and having good business controls is fundamental.
Contrary to the notion that they are restrictive and binding, good business controls can bring numerous benefits to your company:
- Reduce Errors – Frequently the most immediate benefit you will notice when implementing or improving an internal control system is a reduction in errors. Fewer errors save time and money, improves credibility and opens the door for your company to reach its full potential.
- Increase Transparency – Quality controls enable you to showcase the good information about your company and maintain clarity in the details. Transparency supports more cohesive operations and helps to build trust with both your employees, customers, shareholders and other stakeholders.
- Reduce Obsolescence – Complete and accurate records of your inventory and other assets allow you to see what you have and decide what to do with old stock, worn out assets and past due receivables. This will help you improve your working capital position, replenish unproductive assets and drive better credit decisions.
- Prevent Fraud – Proper record keeping and financial reporting is a must for every company. Good asset management controls, including segregation of duties, current bank reconciliations, inventory management and fixed asset record keeping, will reduce the risk of fraud or misappropriation of corporate resources.
- Improve Business Communication – Well-presented facts in an environment with good business controls help to avoid discrepancies and conflict. With good communication, you will also have more timely operations and create a more pleasant workplace.
- Decision Making – Being able to access good information when you need it is key for making solid, well-informed business decisions. It optimizes efficiency.
As defined by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), good business controls are “the set of standards, processes and structures” that form the basis for executing internal control within an organization.
Together, they constitute the control environment, which is one of five components that comprise the integrated framework for overall internal control. With compliance, operating and reporting objectives, the control environment is supported by the following principles:
- It demonstrates commitment to integrity and ethical values.
- It exercises oversight responsibility of development and performance.
- It establishes structure, authority and responsibility.
- It demonstrates commitment to recruiting, training and retaining competence.
- It enforces accountability.
Whether you’re constructing a building or a business, a solid foundation with a balanced framework are key to growth and success. Implementing or adapting a good set of controls will put your company in an optimal position to achieve its goals, improve operations and sustain quality performance. The difference will be apparent.
Identify your path to CFO success by taking our CFO Readiness Assessmentᵀᴹ.
For the most up to date and relevant accounting, finance, treasury and leadership headlines all in one place subscribe to The Balanced Digest.
Follow us on Linkedin!