Working Remotely: Don't neglect internal controls

Internal controls are defined as a system or plan of accounting and financial organization within a business comprising all the methods and measures necessary for safeguarding its assets, checking the accuracy of its accounting data, or otherwise substantiating its financial statements, and policing previously adopted rules, procedures, and policies as to compliance and effectiveness.

You can break down internal controls into two categories: preventative and detective. Our goal is to protect the business by working to prevent and detect human error, misconduct, and fraud. When staff members are working remotely, prevention and detection become more difficult to achieve.

To prevent control issues with remote staff, you should be proactive. Below are a few ideas to consider:

• DMS Access. Does anyone have unnecessary access? If there are functions a staff member has but is not using, limit the access or just remove it. How many staff have had access to something, but you thought “They don’t even know how to use it?” With staff working remotely, they can be less focused and have more time to explore the system. This can be harmless at first, but then they realize that checks are printed on a blank form, and they can now print a check on their home printer, or something equally as disingenuous.
• Step up your processes and be diligent about adhering to them. For example, with check writing, staff members used to be on site for you to easily request additional information. Now they are out of sight and out of mind, and since you haven’t had an issue you might think it’s okay to dismiss a question and just process the check. Don’t pass on following your processes. Require check requests, dual signatures, and have a verifiable trail.
• Have a secure way of exchanging additional data. There are many tools that allow you to scan and store information securely. For the safety of your company, you need to be utilizing one. It might be a difficult job to properly post and audit a deal from home without the actual documents. Posting a deal involves important checks and balances so having a secure data exchange platform will allow remote working to be much more efficient.

We are not perfect, so detecting control issues is very important. Don’t worry, it is not too late. What are you doing currently to detect issues? Below are some suggestions:

• Document review. Be diligent about reviewing the actual copies of checks at month end. When was the last time you looked at the vendors and signatures on your month end statement?
• Reconciliation, reconciliation, and more reconciliation. More specifically, bank reconciliations. There are many clients that do not reconcile daily. Although a monthly reconciliation is appreciated, it’s time to step up your detective skills. Doing a daily reconciliation can quickly identify not only suspicious transactions but human error. You may see an out of sequence check or find a check written to a seemingly suspicious or fictitious vendor. Finding these items daily provides you ample time for quick action.
• Journal reviews. How often do you review entries for out of the ordinary items? If you have a pay plan that pays out based on aged items, it is a good idea to haphazardly review entries made by the staff member being paid. We want to trust employees, but we also want to verify that work is done properly as well as reported correctly.

The overall goal is accountability, not only among the staff but among management as well. When physical distance is between management and staff, sometimes jobs take longer and communication breakdowns happen, impacting productivity. Remote workers need to know you are there to help but still in control of production. If your business has moved to full or partial remote working, it is time to reevaluate procedures to protect the owners, staff, and clients. The only way to do that is to reestablish an internal process that allows your business to feel confident that every measure is being taken to succeed.

An internal audit program can also be a solution. More numbers have probably passed through your financial statements in the last year than ever before. You likely have been working with the same staff throughout this change, and many of you are shorthanded. You are truly busier than ever! It is time to put a plan in place that ensures you are doing the most efficient job possible. Determine an audit period, whether it be monthly, quarterly, yearly, or a combination of multiple. Take the time to review and understand where your risk is. Once you have established your risk you can strategize an internal audit plan then execute it.