To safeguard assets, every organization needs to establish internal controls.
Here is the list of widely-accepted forms of financial control:
a) Be clear about roles and responsibilities. One person to be made responsible for losses in the cash register as and when they occur. In IT we use a RACI chart to do this and its a nifty tool for this purpose.
b) Where there is a potential of interest, create two or more roles. The person who controls cash cannot double-hat as the book-keeper. In a previous job, my role as IT governance reported within the IT department. I actually got into some trouble suggesting that I report to internal audit instead.
c) There has to be a system of checks and balances like two signatures on checks or access to lock boxes.
d) Hire reliable personnel. A nice acid test was suggested by the book is to ask a previous employer whether they would rehire the worker if he were available.
e) Document control procedures wherever possible. A simple example is an incentive given to every customer to report incidents where a receipt was not given to them.
f) Create duty rotation. Banks do this a lot to see whether some problems stop when an employee goes on vacation.
g) Utilize independent checks like auditors and CPAs.
h) Supervise closely to monitor performance.
As you can see, this is a lot of work. If I ever set up a company to do all this, I won't be able to focus on providing training and research on financial markets. Imagine having to create these internal processes for marketing and finance at the same time.
This is why MBAs still matter. You need good administrators with book smarts to keep a business running.
Visionaries can't do much without able lieutenants.
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