Ways to Control Accounting & Inventory

by David Ingram, studioD Google

Accounting systems and inventory can be especially vulnerable to theft, fraud or outright mismanagement. Controlling the integrity of your accounting records and the security of your inventory can directly contribute to your bottom line by reducing unnecessary expenses. Small business owners have a range of internal control options available to them, and each business requires a unique set of controls to adequately secure its assets.

Security Systems

All accounting data and inventory should be held as securely as possible. Restrict access to inventory storage areas, and install security cameras with recording devices. Perform regular and random inventory counts to uncover issues of theft or waste quickly. Accounting data can be compromised just as easily as inventory or cash, and criminals can do the same amount of financial damage by manipulating accounting records as by physical theft. Protect all servers and computer workstations with passwords, and hire an in-house or third-party network security specialist to secure access to your files. Compare internal financial data with bank statements and financial documents to ensure that your records remain accurate.

Separation of Duties

The philosophy behind separation of duties is that theft by collusion becomes harder when more people are involved in a multi-step process. Accounting and inventory duties involve a number of activities and steps; separating these duties among employees at various levels of your company can help to reduce incidents of collusion. Do not allow the same person to place inventory orders and check the accuracy of incoming shipments, for example. Do not allow the same person to make bank deposits and enter cash receipts into the accounting system, as another example.

Independent Audits

Third-party financial audits can be expensive and present an impediment to normal productivity, but they are well worth the expense if they uncover cases of financial fraud or theft. Auditors will dig deep into your accounting system and financial records to ensure that all accounting duties are being performed in an ethical and professional manner. Give your staff only enough advance notice to allow them to prepare for their role in the audit; do not provide notice far enough in advance for thieves to cover their tracks.

Internal Reports

An effective system of internal controls must provide regular status reports to managers and other decision-makers. A management information system can combine any operational or statistical data, and present it to managers in a readable, logical format. An MIS can create reports on basic information, such as daily sales and expenses at each retail outlet, and more complex data, such as the average number of unacceptable and barely acceptable mistakes on a specific production line section.

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