Introduction
Internal Control is essential for any business organization, as it helps to minimize errors and maximize efficiency when working with financial assets. Some fast-food companies, like Southern Fried Chicken, put a video camera above the cashier to record the details of the operations. Others, like high-tech cybersecurity firms, divide the data and let separate teams work with different parts so that only a few selected employees know the whole financial situation.
Issuing the Receipt
Some stores post signs about paying $5 or providing a free lunch (like Einstein Bros. Bagels) if a customer does not get a receipt. At the end of the day or the shift, the cashier machine’s records have to match the amount of money in the drawer. If that does not happen, cash receipts can be used for an internal or external investigation to understand the reason: technological error, theft, or something else. The incentive of something free for the customers stimulates both clients and cashiers to pay attention to receipt printing.
Friday Night Receipts
Movie theaters with late-night showings on Fridays may have incorrect balance recorded for the cash received on those days because of the upcoming weekend. The first step in controlling the asset flow is mandatory receipt printing for each transaction. This way, the records will be stored in both the cash registers and in paper form. Second, the bank reconciliation process clarifies each transaction’s exact date and keeps tight control over the financial assets. Warren and Jones (2019) also list hiring competent personnel and dividing the responsibilities among different departments as the general practice of effective internal control for the movie theaters. Detailed instructions for the staff may also benefit the accuracy of Friday operations.
The Importance of Internal Control
In my opinion, internal control practices are suitable for businesses for several reasons. First, they allow the accounting department to have an accurate snapshot of the company’s financial situation at any given moment. Second, internal control highlights the importance of the personal responsibility of employees. Finally, it provides details for financial investigations if the records do not match. Overall, internal control is a useful instrument for business companies.
References
Warren, C. & Jones, J. (2019). Corporate Financial Accounting. Cengage Learning.