Let’s face it, dealing with internal controls from time to time can be a headache and can certainly get out of hand. The power of an organized internal control structure yields a plethora of benefits in terms of cost efficiency, reduced workload, fewer headaches, and happier employees – You know what they say, Organized People Play™.
The Average Life-Time Cost of an Internal Control
Internal controls can be expensive. With all of the operating, reporting, and compliance costs we have to worry about these days in our annual budget, a hit in internal controls really puts a damper on those numbers that stakeholders care so dearly about. A single control can cost a company on average $50,000 in it’s lifetime when considering costs in devising, implementing, carrying out, and testing these finicky creatures.
Consolidation is Key
A great way to reduce your total control count is to determine how many controls actually relate to a single, similar process. For example, if you have a control in accounts payable that allows a single person to create a wire transfer, another control stating that different person is responsible for reviewing this transfer, and yet another control stating that a totally different person is authorized to approve the transfer, then you have three different controls that could potentially be consolidated into one. This is great for documenting your segregation of duties but highly inefficient in terms of the auditing and documentation management process. Rather than increasing your auditing costs by performing three times to amount of work in testing this process alone, create language that encompasses all of these processes into one, neatly packaged control. And, this is just one example – imagine the consolidation possibilities by reviewing your control language across the board (and if you have more than one control for journal entry creation, then this is a great opportunity for you).
A Final Note in this Song of Efficiency
Maybe you won’t create a paradigm shift within your company by analyzing and modifying your current control structure but there’s always room for improvement in efficiency. And, for most companies, there is rarely a need for hundreds of controls to clutter up company processes that ultimately drive up compliance costs with an increase in headaches along the way. Take a few moments to review the blueprint of your company’s operations – who knows, maybe you will create that paradigm shift and ultimately earn the big promotion you’ve been pursuing!