by Tina on November 8, 2010
Obviously, all businesses need to  care about internal controls to protect their assets and reduce the risk of fraud. In recent years,  the growing awareness of fraud has resulted in a focus on stronger internal controls at the smaller, private companies. It is not necessary for small companies to spend large sums of money to implement internal controls. But, understanding internal controls and how they can protect themselves and their small business is definitely important. Many small businesses are finding that banks or other financial institutions want to see stronger evidence of internal controls in the company before lending money.
Good internal controls are essential no matter how small the company, for many valid reasons. Fraud prevention, embezzlement detection, and accurate financials are all reasons to follow good internal control practices. Implementing controls into the financial accounting software alone isn’t enough to ensure compliance; it takes some people power too. Since most small business owners have very little accounting background, accountants are necessary to play a key advisory role in helping a business design and implement sound internal controls. Many private companies are seeing benefits from implementing internal control provisions relating to accountability, independent audits, internal controls and document retention.
Additional benefits to implementing strong internal controls:
- Strong internal controls focus on getting the financial statements right
- Working on internal controls now will address and prevent future or potential problems
- An outside party such as an investor, banker or accountant recommendation
To solve present business problems and/or help prevent fraud from occurring without internal controls a business owner can never know if their information is complete, accurate or reliable. Time should be taken to set-up, implement and review a policy of internal controls. Once the policy has been established, management should ensure that the controls are being followed. Some of the items to consider in creating an internal control policy are:
- Segregation of duties – policies and procedures
- Safeguarding of assets
- Red flags for fraud
More on internal controls and Red Flags to watch for coming soon!
by Tina on October 19, 2010
Many of you just finished filing your 2009 tax return on the October 15 extended deadline. How can you be ready to file by the April 15 deadline when it comes to preparing your 2010 taxes?
October is not only the time to be preparing your 2011 operating budget, it is also a great time to start planning for next year’s tax filing by making sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.
Here are a few things to know about recordkeeping:
- Keeping well-organized records also ensures you can answer questions if your return is selected for examination or to prepare a response if you receive an IRS notice.
- The IRS does not require you to keep records in any special manner. You should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
- Bills
- Credit card and other receipts
- Invoices
- Mileage logs
- Canceled, imaged or substitute checks or any other proof of payment
- Any other records to support deductions or credits you claim on your return
You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:
- A home purchase or improvement
- Stocks and other investments
- Individual Retirement Arrangement transactions
- Rental property records
Small business owners must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later.
Some examples of documents business owners should keep:
- Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
- Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
- Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
- Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks
For more information about recordkeeping guidelines from the IRS visit IRS.gov and check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses.
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