Five Internal Controls Every Business Should Have in Place

Running a business comes with plenty of moving parts, and keeping things organized while protecting your finances is a must.

One of the best ways to safeguard your company is by implementing strong internal controls. These practices help ensure your processes are efficient, secure, and free from unnecessary risks.

5 Internal Controls for Businesses to Utilize

Here are five internal controls that every business should consider putting in place:

1. Segregation of Duties

It might seem more efficient to have one person handle multiple aspects of a financial process, but that approach can lead to trouble. The idea behind segregation of duties is simple—no single employee should control an entire financial transaction from start to finish.

For example, the person approving purchases shouldn't be the same one reconciling financial reports. Similarly, the same individual shouldn't be responsible for authorizing payments, recording transactions, and handling cash. Spreading these tasks across multiple people creates built-in checks and balances, reducing the risk of fraud or errors slipping through the cracks.

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2. Monthly Account Reconciliations

Reconciliation is an important step in the monthly financial close process. While it may take time, it pays off in accuracy and transparency.

To strengthen this control, make sure an independent review is part of the process. Having a second set of eyes on reconciliations ensures that discrepancies are caught and resolved before they become larger issues.

3. Restricting System Access

Not everyone in your organization needs access to every financial system or report. Clearly defining job roles and aligning security controls accordingly can prevent unauthorized changes or breaches.

Access should be granted only to employees who need it, and there should be a process for approving new users. Additionally, reviewing access permissions regularly ensures that former employees or those who have changed roles no longer have access to sensitive information. It’s also helpful to track user activity so you know who is making changes in the system.

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4. Vendor Validation and Periodic Reviews

Adding new vendors to your system should be a controlled process. If left unchecked, there’s a risk of fraudulent vendors being created and payments being misdirected.

A simple safeguard is requiring an independent review when a new vendor is added. Additionally, conducting periodic reviews of all vendor accounts helps identify any red flags, such as unusual payment patterns or inactive vendors still receiving payments.

5. Reviewing and Approving Manual Journal Entries

Manual journal entries can be a weak spot if not properly monitored. Whether an error is made accidentally or someone intentionally alters financial records, an extra layer of oversight helps maintain accuracy.

Establishing a review and approval process for all manual journal entries reduces the likelihood of mistakes or manipulation. Requiring a second person to verify the entries before they are posted ensures transparency and accountability.

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Look Internally to Enhance Security and Accuracy

These five internal controls are simple yet effective ways to enhance security and accuracy in your business operations. If you haven’t already, consider working with an external advisor to assess your company’s internal control framework.

A fresh perspective can help identify gaps and provide recommendations to make your financial processes even stronger.