Internal controls are an important part of any business accounting system. Whether controls are manual or automated, understanding why and how they work can help determine the effectiveness of the overall accounting system.
What are internal controls?
Internal controls are policies and procedures a business follows in its operations to protect themselves. Administrative controls within your Accounting and ERP software include determining the segregation of duties among departments and employees, deciding which employees are authorized to conduct particular activities, and developing independent verification systems.
Internal Controls Checklist
When it comes to managing your internal controls, starting with a checklist is a great way to ensure there are no oversights. These checklists should be tailored to the needs of your business and the specific software you have in place. They could include:
- Sharing accounting duties and processes – requiring critical tasks to be reviewed by others
- Requiring specific people to take ownership of specific parts of transactions can add a layer of responsibility
- Limiting and controlling access to the accounting system
- Updating passwords and reviewing user access privileges regularly
- Utilizing standardized documents for all financial records to maintain consistency over time
- Calculating daily or weekly trial balances
- Investigating discrepancies as early as possible
- Tracking physical assets in the accounting system
- Consistent checks to ensure data entry is accurate
- Consistent reporting cycles and review
- Regular accounting reconciliations to ensure balances match where necessary
- Reviewing CPA requirements and matching them to current controls
- Regular training with your software provider
- Regular software updates
Monitoring internal controls should be an important part of the weekly/monthly accounting system maintenance. While the available options may seem overwhelming, understanding the ins and outs (aka Debits and Credits) of the accounting and ERP software make all the difference when identifying issues before they become major problems.
Connected Accounting and ERP Software makes managing internal controls easy – with straightforward descriptions, easy to read prompts, complete record audit trail, and a reliable support/customer service team.
Some examples of these controls within the Connected Accounting and ERP system are:
- Administrator level user privilege designation
- User-specific privilege – allow your users to view/add/edit specific areas – segregate duties among departments and employees
- Audit Controls and audit trail tracking
- Internal authorization approval- purchase orders, expense reports, sales orders
- Record Info – Records the username/date/time of who added, modified, and posted each transaction. In many screens, there is also expanded record info tracking each action.
- Ability to close periods by module – protects data at cutoffs – no additional entries can be done in the period once the month has been closed – this can only be reopened by the administrator
- Document attaching capability
- Data is easily backed up