At Impact Accounting, we believe that the Accounting function of an organization should be supportive, accurate, and informative.
We realize that implementing internal controls takes time that is hard to come by these days… but it’s worth it. We love working with business leadership or ownership to implement, augment, and design controls that are realistic and provide ease of mind for all involved.
Reliability – Internal Control is an important aspect of ensuring that financials are reliable tools for management and ownership to use in decision making.
Helps in Staff Turnover – Proper internal control requires documentation. This helps ensure that there is a paper trail in the case of staff turnover.
Protects Employees – Documented internal controls protect those involved in running the organization from the perception of anything unethical or conflicted
Below are some basic controls that work with many types of organizations with small teams involved in the financial processes as well as a checklist for you to use to take a temperature on the internal controls in your organization.
- Each user in the accounting system should have their own loggin and password
- Audit trails in accounting system should be enabled
- Accounting Policies and Practices manual should outline processes and instructions
- Cross-training is always a good idea!
- Payroll should be entered and a preview generated
- Payroll preview should show the total dollar value to be transmitted
- Payroll preview to be reviewed and signed by someone other than the person who entered in
- After transmitting, attach a print out to the payroll preview, the total from the confirmation should match the approved preview.
- All changes entered into payroll (everything from address changes, benefit changes, pay rate changes, and reimbursements) should have a copy in the payroll file for that payroll period.
- All invoices should be approved and contain signature/initials of approver
- Approver should not be the person making disbursements
- Checks should be printed and matched with invoices
- Check signor should review evidence of approved invoices along with checks as they sign them
- Recommend keeping a check register listing that lists the check numbers used in any given check run. This log should be initialed by check reviewer. Any gap in check numbers would show misappropriated checks.
Additional control would be for Check Signor to sign a copy of the Check register (Vendor name, check numbers, date, and total paid)
- Reconciled bank account should be provided to check signor on a monthly basis along with the original bank statement.
- Check signor should review the bank statement and reconciliation for any adjustment that have been made and ensure that all disbursements are reasonable and in accordance with their expectations.
Journal Entries and Month End Close:
- Journal entries should be reviewed by another party in addition to the individual entering the transaction.
- Monthly financials should be reviewed (and document the review). Many companies have a month end checklist and compile a monthly closing packet (sometimes done in excel). This file should contain supporting documentation and/or calculations for every item on the balance sheet (to “prove” the number). Additionally, it should contain key ratios and any descriptions of unusual transactions or fluctuations on the income statement.
Control over Credit Cards and reimbursements
- All credit card transactions should be reviewed by the employee’s supervisor or individual with budget responsibility.
- Any reimbursements or charges on a company credit card for the President / GM/ Executive Director of the organization should be reviewed (and document this review) by another party (such as CFO, COO, or Board Member).
Compensation related controls
- Adjustments to pay and/or bonuses should be approved by President/ GM / Executive Director.
- Changes to President / GM/ Executive Director pay and/or bonuses should be approved by the Board or company ownership.
In addition, here is a Checklist/Questionnaire that will aid you in determining which controls are needed. For more information contact Impact Accounting by clicking this link.
Y N Do team members share logins to ERP/ Accounting/ other software involved in
Y N Are payroll reports reviewed by someone other than the processor?
Y N Does management review the financial statements?
Y N Is a monthly packet prepared with financial information that contains supporting
Y N Are signature stamps used or pre-printed
Y N Is check stock locked?
Y N Is there a three way match of purchase order, receiving document and supplier invoice?
Y N Are Time sheets approved by supervisors?
Y N Are totals entered into the payroll system matched to the time sheet totals?
Y N Is direct deposit used exclusively for payroll?
Y N Are invoices stamped “paid” when they have been paid?
Y N Are inventory counts verified by someone?
Y N Is Petty Cash on hand?
Y N If Petty Cash is used, is it locked up?
Y N Do ACH or online bill payments have a notification that goes to someone in addition to the individual processing the payment as a confirmation?
We hope you found this information helpful. Please contact Impact Accounting by clicking this link to discuss more.