Without the proper "controls" in place, a small business can struggle or go under, especially in this tough economy. Although there are no guarantees, the following are basic guidelines to follow in six areas:

1.  Sales: It is important that accurate sales figures are used to establish company revenue and direct inventory purchases. Implement detailed procedures for cash, checks, credit cards and online sales.

*Use an invoicing system for shipping goods.

*Ensure that sales figures are correct and commissions are not paid until funds are received.
   
*Reconcile sales with payments. Double-check sales against original invoices.

*Obtain proof of delivery when goods are shipped.

2.  Accounts receivable: Failure to collect past due accounts can create cash-flow problems and erode profit. Establish credit and collection policies in writing, and follow through on their implementation (e.g., review credit balances on a regular basis).
*Separate accounts receivable from cash reporting.

*Have accounts "aged" regularly and authorize an independent review of the report.

*Cross-check noncash credits and bad debt write-offs.

*Establish numerical or batch-processing for billing.

*Initiate security measures for outside communications.

3.  Accounts payable and purchases: Many companies are prone to mistakes in this area. Below are procedures for your staff to follow:

*Record purchase and accounts payable procedures.

*Initiate controls to cross-check duplications.

*Check pricing information and prices of competing vendors.

*Focus on large billings and items that may be disguised under smaller entries.

4.  Cash accounts: If your business processes a significant number of cash transactions, it can easily fall prey to theft, especially if internal controls are substandard.

*Have employees balance cash at the end of their shifts.

*Safeguard checkbooks and other methods of disbursing funds.

*Reconcile all bank accounts on a regular basis.

*Separate cash deposits from other functions at the bank.

* Divide responsibility for cash disbursements and purchases from the approval process.

5.  Payrolls: Thanks to recent technological advances, it is easier than ever for employees to commit fraud if tight internal controls are not established.

*Ensure that electronic passwords are protected and changed frequently.

*Review bank account deposits to ensure that wages are being disbursed properly.

*Separate responsibilities for payroll preparation, disbursement and distribution.

*Investigate variations in payroll expenses and monthly budgets.

*Train backups for critical payroll responsibilities.

6. Physical assets: It is also relatively easy for physical assets to be misplaced or misappropriated. Protect valuable property from external, as well as internal, access.

*Lock up laptops and other electronic devices.

*Record all asset purchases and maintain detailed records.

*Assign responsibility for supervising physical assets to a particular employee and a backup.

*Divide responsibilities involving expensive equipment among employees, if possible.

Finally, coordinate these activities with your business advisers. They can help you install some meaningful controls.

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