Business controls aim to prevent fraud and errors and work toward promoting efficiency. They also incorporate business cost cutting strategies to reduce or eliminate unnecessary expenses.
Internal Business Controls
The procedures and policies that companies put into place are called Internal Controls, and they are handled by top management or the business owner. Administrative Controls and Accounting Controls are the 2 main types of Internal Controls.
Accounting Controls safeguard the assets of the company and see to it that the accounts have reliable information. Administrative controls, on the other hand, ensure that employees of the company work efficiently and comply with company rules.
Responsibilities Under Business Controls
A wide range of responsibilities comes under business controls. These can be evaluation of performance, approvals, separation of duties and settlement of accounts. In IT, controls include protection of passwords, authorization to make changes and identity verification. Other controls might also include policies related to personal conduct of employees, such as personal use of telephone equipment and safety procedures while using company equipment and on company property.
All these controls need to be checked and monitored by management. The benefits of the controls also need to be weighed against the costs they are incurring within the organization.
Creating controls isn’t a one-time operation; they also need to be updated and re-evaluated from time to time to ensure that they remain up-to-date and relevant to the organization.
Controlling Business Costs
Another important aspect of controls is controlling business costs. This works towards increasing profit margins. There are two types of costs that businesses incur: variable and fixed. Fixed costs are those costs not related to sales or production.
Fixed costs include insurance, rent, salaries, advertising costs and other costs that are required to run the business on a daily basis. They also include the utilities that are used by the business, such as gas, electricity and water. Raw materials, or inventory, are variable costs of the business that are directly connected to business activity (sales and production).
Ways to Implement Business Cost Cutting
One way to cut your small business costs is to find out which products are least and most cost-effective. You can invest more money in those which are more cost-effective while cutting down on those which are not. Next, you can cut down on your variable costs, like advertising and salaries. Cutting down on fixed costs might cause operational or financial discomfort, so it is better to avoid doing this if at all possible.
You can also start evaluating the different costs of your small business and find their contribution towards your company’s growth. After evaluating them, you might find out a way to cut down on some of the costs – you might even find an alternative for some of them.
You should also monitor your costs from time to time. It is easier to find effective cost-cutting methods if you keep track of them and monitor them regularly.
Implementing controls is important for every business, large or small. By using the tips above in your own business, you’ll be able to operate more efficiently than ever before – and improve your bottom line.