Financial controls for Small Business

Why internal controls are so important for a Small Business?

A strong control environment will ensure a Small Business is run efficiently and there is a reduced exposure to unknown tax liabilities and fraud. As owner you should consult your Small Business Accountant on a continuous basis and update the internal controls as the business grows.

A Small Business has limited resources and as owner you need to protect and efficiently manage these resources. The Small Business owner must pay close attention to internal controls and how efficient they are, since this is the key to maximizing the business potential and reducing the risk of loss.

From our experience as a Small Business Accountant there are several areas that are likely to affect most of our Small Business clients:


These days most Small Businesses use an off-the-shelf accounting package to track payroll. Some of the most popular accounting packages are Quickbooks and Simply Accounting. As a Small Business Accountant we can work with both packages and we can provide value-added services to our clients.

Without proper supervision in place there is potential for fraud or errors. Some of the recommended controls for Small Business are:

  • the payroll officer should not process their own payroll;
  • where possible, segregate payroll processing from payment function;
  • timesheets should be approved by a manager;
  • the owner should review the payroll register and sign and distribute the payroll cheques.

Cash Disbursements

Cash and lack of safeguards in place can increase the risk of fraud. Some Small Businesses do not have strong internal controls to safeguard cash and sometimes this results in misappropriation and fraud. As a Small Business Accountant we recommend the following:

  • all disbursements should be done by cheque;
  • when possible, the Small Business owner should be the signature authority on the cheques;
  • bank reconciliations should be prepared on a monthly basis and reviewed by the Small Business owner;
  • when possible use direct deposits;
  • all cheques should be issued in chronological order and accounted for.

Accounts Receivable

Accounts receivable are one of the most important assets for a Small Business. Weak internal controls in this area such as failure to collect receivables can result in cash flow problems and eventually to reduced profits for the Small Business owner. As a Small Business Accountant we always recommend our clients pay close attention to receivables. Some of the following points should be considered:

  • accounts receivable should be reviewed on a monthly basis;
  • reconcile accounts receivable listings with the general ledger;
  • credit checks should be conducted on all new customers;
  • review all accounts older than 60 days and designate a person to follow up with each creditor.


The above internal controls should be considered as a guideline only and are not intended as an exhaustive list. As Small Business Accountant we always recommend our clients discuss the internal controls with us. Strong internal controls will provide for an efficient and reliable work environment that will increase the profits for the Small Business.

Your trusted Chartered Accountant provides internal controls advice to small business and contractors.