5 Reasons Your Business Needs Internal ControlsPosted on October 26th, 2018
There are a lot of moving parts to a business, and bookkeeping is an essential portion of a successful business. But if you rely on simply inputting data into an accounting software and assuming all is well, you could be setting yourself up for real trouble.
Even the best accountants make mistakes from time to time, and if you don’t have a system in place to spot these errors, you may not notice them before they end up seriously costing your business in cash and assets. We’ll break down the top five reasons your business needs internal controls if it’s going to survive.
They Prevent Errors
The most obvious benefit of internal controls is minimizing the opportunity for mistakes in your ledgers. When you have an established and reliable method for fact-checking your data and ensuring its accuracy, it gets much more difficult for mistakes to slip by. With a business, your financial data is responsible for determining where income is going, who still needs payment, and what gets taxed every quarter, so timely and accurate books are vital to the viability of your company.
They Save Time
Even if you aren’t running internal audits regularly, you will need to run them eventually. However, sporadic audits take far more time to conduct, as they essentially have to be built from the ground up every time. With a thorough system already in place, you can streamline the process and ensure that nothing gets overlooked.
They Protect Your Assets
Your cash flow is the lifeblood of your company, but if you aren’t sure how much you have or where it’s going, your business can’t operate effectively. Worse, you leave yourself open to fraud and embezzlement, dangers capable of crippling a company. Internal checks put a stop to any leaks in the cash flow by ensuring that every dollar is accounted for regardless of where it comes from and where it goes.
They Protect Your Investors
When an investor puts money into your business, they have an expectation of a return on that investment, and they have a right to your financial data so long as they have skin in the game. Companies with inaccurate and unreliable financial reports are terrifying to investors, and make your business unappealing as a result. Internal controls keep your financial records clean, accurate, and timely, keeping your investors happy.
They Keep You Compliant
Since the accounting scandals of the early 2000s, regulations have been in place to hold companies accountable to their investors with reliable financial reporting. This all but mandates that companies today have internal controls in place; otherwise, they risk the attention of the government. In short, you can run your own audit, or you can let the IRS do it for you.
Internal controls are a vital part of a modern business, but setting up this process can be intimidating. Cox Accounting & Financial Services Inc. helps companies in Raleigh and the surrounding communities develop efficient and dependable internal controls. Contact our office to schedule your consultation today.