Health can be defined as the overall human well-being of body
and mind. It is a dynamic condition, resulting from the body's
constant adjustment and adaptation in response to stresses and
changes in the environment for maintaining an inner
The same concept of health can be applied to the overall state
of your company, meaning that a healthy business is one that is
constantly adjusting and adapting to the environment in which it
operates. A company's ability to change is impacted by its
resources, which not only includes cash on-hand, but current
information on the company's performance. Without proper
systems in place, it may be hard to understand the resilience of
your business when the time comes to respond to changes in the
One significant factor that contributes to keeping a business
operating in tip-top shape is having effective internal controls.
Such controls help create peace-of-mind by ensuring data used to
generate reports is accurate, resources such as assets and cash
reflected on the books are actually available for use, and
information can be easily accessed.
This article will illustrate the importance of having checks and
balances in place, explain what an effective control looks like,
and help to identify measures to establish or improve controls to
guarantee your business is operating in a healthy manner.
Data integrity is crucial in a business of any size to enable a
user to rely on the inputs used to generate performance metrics,
such as interim statements or aged listings. Having controls in
place ensures there are an appropriate number of eyes overseeing
business processes to prevent errors from being made. An internal
control that confirms information is correctly entered into the
system will place another level of review or validation into the
process. Easy steps to take may include the implementation of
account reconciliations and having the appropriate person review
work performed and data entered into the system.
In addition, business owners must have confidence that their
resources are not vulnerable to fraud or misappropriation. In a
healthy internal-control environment this is referred to as
"safeguarding of assets" and can be implemented using a
variety of measures. Successful controls will ensure only the
appropriate staff is granted access to vulnerable assets and that
no one individual is accountable for handling funds.
For example, restricting access to funds by locking away blank
cheques and petty cash, as well as segregating the duties related
to handling receipt and payment of funds between different
individuals, will drastically reduce risk. Other easy steps could
include implementing access controls, such as passwords, limiting
access to secure information and data to appropriate personnel, or
maintaining physical security over inventory that can easily be
Just because something hasn't gone wrong yet does not
preclude the occurrence of future incidents. Efforts made to
produce accurate data and secure assets will not yield the desired
effect unless they are clearly communicated, monitored, and updated
as necessary. Employees must understand the importance of internal
controls in the workplace and that they are being enforced. Knowing
that someone is keeping a watchful eye places additional pressure
on staff to take care in their work and their broader role within
With owners and managers, understanding the benefits that
internal controls can provide – accurate data and the ability
to produce meaningful reports, control over assets, and attentive
employees – they can take the necessary steps to safeguard
the health of their business.
Over the past year, we have watched the Canadian dollar drop relative to its U.S. counterpoint impacting Canadian businesses. U.S. goods and services are now more expensive, U.S. sales make a premium and errors when recording foreign exchange transactions can cost you more money.
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