A Tool For Success

“It was just poor management. Looking at it from a professional point of view, the procedures and policies weren’t there to control things.”

– Frank Rawa

It is evident that to achieve the goals and objectives of the business, procedures and policies must be in place. These procedures and policies are referred to as controls. The first question is do you know what the goal is for your business and do you know what objectives to achieve to reach the goal?
According to Oxford Languages, control is the power to influence or direct people’s behaviour or a course of events. Control is used as a standard of comparison for checking results.

Control should not be viewed as manipulative, it is rather the setting of boundaries to achieve goals and objectives. Management uses the policies and procedures to monitor and regulate the activities by identifying potential risks, preventing fraud and error and improving the decision-making process.
Be aware that implementing these boundaries, if none was in place previously, may create stress, animosity, competition and confrontation with the business.

Controls are used to monitor and regulate how each employee carries out their duties and the effect the individual performance has on the group as well as the performance of the financials, operations, and social and environmental environment. Controls ensure more consistent outcomes and reduce the risk of error and fraud because the systems and processes operate as intended. Thus, the operations are streamlined, waste is kept to the minimum and the available resources are used optimally. It is important to be aware of the cost of control, the benefit must always outweigh the cost to implement and maintain the control.

By identifying the risks and implementing procedures to mitigate the risk, the business will be protected against financial, legal and reputational risks. Management can make informed and effective decisions because controls ensure accurate and timely information.

Controls can be categorized as Before, During and After, thus it is linked to the time of the activity.

1) Before – These controls are in place to ensure bad things do not happen. The focus is on the inputs. It might be costly and time-consuming at first, but ensure the operations run smoothly. Examples of these controls are: Making a backup of the computer regularly. Limiting access to the cash in the business. Have an employment process.

2) During- This is real-time control. These controls help maintain quality and consistency. It is a set of standards used to measure performance and procedures to be followed to achieve a specific outcome. Examples of these controls are controlling the movement of the car. Adjusting the temperature in a cold room to maintain a specific temperature. Checking the quality of the product during the manufacturing process.

3) After – These controls give feedback or information after the process to determine the actual performance against the set standard. Examples of these controls are the comparison of the actual financial performance against the budget and reviewing the actual time spend on a job against the standard.

The controls are unique to each business and are based on the nature, size and structure of the business. Controls are also not set in stone and must be adjusted as required.

The basic control process can be illustrated as follows:

The basic principles are to set specific performance standards in line with the goals and objectives. These performance standards are the indicators to be measured to determine if there is progress towards the goals and objectives. The actual performance can be monitored by collecting the relevant data. Compare the actual performance against the set performance standards. Investigate the variance and develop a clear understanding of what gave rise to the variance. Then take corrective action by either adjusting the performance or addressing any issues that are in the way of success. It is also important to evaluate the goals and objectives to determine if any additional resources and support are required. Give feedback to ensure all involved is in alignment with the goals and objectives.

Use this checklist by Eric Gerard Ruiz to evaluate the control environment in your business currently.
1) Are the incompatible duties (authorization, recording and custody) for each activity performed by one person?
2) Does the owner/manager participate in and oversee the daily operations, should it be impossible or uneconomical to separate the incompatible duties?
3) Does the document have a purpose? 
4) Does the person who processes and approves the document sign the document off with a special note e.g. Paid, Approved etc.
5) Are the documents pre-numbered?
6) Does the person reconciling the account have access or custody of the account?
7) Is the owner/manager the only person that can authorize transactions?
8) If no, are there specific levels of authorisation in place?
9) Is a set of steps (Standard Operating Procedures) compiled for routine transactions and procedures?
10) Is measures in place the control the cash in the business?
11) Do the employees have full access to the applications and software that are used?
12) What methods are being implemented to secure the business assets, e.g CCTV, limited access to specific areas, security gates?
13) Is a recovery plan in the case of unforeseen events and disasters?
14) Is a recovery plan in place in case of the resignation, replacement, termination or death of a key employee?
15) Do set and review your actual financial performance against a budget?

Do not fall into the category of poor management use controls as a tool to ensure that the business achieves its goals and objectives effectively and efficiently.

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