According to a spokesperson from the Risk Unit of Marquette University of Milwaukee, Wisconsin, "Establishing effective internal controls can help a department operate more efficiently and effectively and provide a reasonable level of assurance that the processes and products for which it is responsible are adequately protected." And that holds true for any kind of company. When you think of all the moving parts in your construction company, it becomes apparent that controls are essential to your long-term financial well-being.
To evaluate whether your company is protected, it is important to ensure that your company has, and follows, internal controls. The two categories of controls pertain to "before" and "after" or, in industry terms, "preventive" and "detective" controls.
These are proactive controls aimed at discouraging errors and irregularities. According to Vanderbilt University, examples include the following:
- Segregation of Duties: Assign duties like accounting and approvals to different teams or employees.
- Approvals, Authorizations and Verifications: A supervisor's approval (manual or electronic) provides a checks and balances system because he or she has verified and validated that the activity or transaction conforms to your established policies and procedures.
- Security of Assets: Both preventive and detective, this restricts access to assets like equipment, inventories, securities and cash.
While preventive controls are designed to discourage errors and irregularities, detective controls are designed to find them after they have occurred. Examples include the following:
- Performance reviews
- Physical inventories
You can put several controls into place at your company right now:
- Lock your office when you leave, even for a short time.
- Review monthly comptroller's statements.
- Require authorizations.
- Perform reconciliations on accounts.
No business owner wants to believe that the employees he or she sought, hired, trained and has confidence in are doing anything deceitful. But sometimes unexpected things do happen, and steps need to be taken to protect your business.
If you are unsure of how to create and put into force internal controls at your construction company, call us. We have the background and knowledge to save your company a great deal in funds and assets.