Another great week has slipped by. This is a new opportunity for our weekly posts and consideration of some pertinent enterprise or business management issues. I candidly do hope that our weekly posts are adding value to practicing entrepreneurs, budding entrepreneurs, entrepreneurship scholars and all other stakeholders.
Now, let us consider ‘internal controls’ today. This is a common phrase in enterprise management, and of course many people know what it is and what it entails. However, some do not. For this reason, I will start by defining internal controls briefly. Internal controls are simply all those rules, limitations, guidelines (generally called controls), whether physically, financially, administrative etc that an enterprise puts in place in order to meet business objectives, ensure effective and efficient business operation, protect business resources, and ensure that staffs adhere to business policies and guidelines. Very easy, isn’t it? Again, as I sometimes say, you can go academic with these definitions – but please let us agree not to confuse people anyhow. For goodness sake, not everybody understands and likes complex business lingo. Isn’t this true?
As an example, you might decide that payments above Euros 1,000 (you can pardon me if you don’t like the EU) must be approved by the MD/CEO before cash is disbursed. By the way, the limits also depend on the size of business or enterprise we are talking about. The above limit might be just petty cash in your business, and you might only consider Euros 10,000 and above as an MD/CEO. This is an example of a financial control. I certainly don’t think you have time to approve even purchase of biscuits or tea packs for office use. But if you like it as an MD – you can go ahead. No comments! You might again decide that no staff accesses the office beyond normal working hours – and this is an example of an administrative control.
You might decide to have a reception for your business, where all business matters are first logged before being forwarded to different respective officers. This makes a lot of sense, don’t you think so? It creates some sense of order and this should improve effectiveness and efficiency of the business. You can just imagine a situation where each one of your 40+ staffs get business and proceed to organize execution without control. In fact, the name of your business might easily change to Chaos Ltd – because there can be so much confusion that the business simply becomes disaster. I think those are enough examples. Now you should be able to enumerate some controls for your enterprise – in the areas of finance, administration, marketing etc. Right?
Back to what I want to consider in this article now. What are the key issues an entrepreneur must know and consider regarding internal controls in the business? You might have your points – but allow me to say the following.
Candidly, this has been a long one today – and I do hope you were not about to run away from the article due to its length. Thanks a great deal for your time and patience.
With all goodwill – and best wishes,
The Wise Entrepreneur