Internal controls for agribusiness operations

By Brian Ravencraft

Having sound internal controls in place is necessary for any agribusiness. It can be the difference between success and struggle. Internal controls are designed to prevent fraud, streamline operations, and ensure that your business is following best practices. Every type of business needs to have controls in place, no matter the size. Let’s take a look at some of the top controls to implement.

Separation of duties

Segregating duties among your employees is crucial for preventing fraud and costly errors. By dividing responsibilities for different processes, no single employee or department has too much control. For instance, the person who reconciles your bank statements shouldn’t be the same person who approves transactions within your accounting system.

Regular reconciliations

Frequent and accurate account reconciliations help identify discrepancies that may point to mistakes, internal fraud, or external theft. This includes reconciling bank statements, credit card statements, and other financial accounts to the accounting records within your business. A monthly review can help address any issues in a timely manner.

Physical document storage

Store all financial documents, such as checks, deposit slips, and invoices, in a secure location. Implement a system for the issuance and retrieval of physical checks and keep close track of any pre-numbered business forms. Limit access to inventory and equipment. Only authorized employees should have access. Consider using security cameras to monitor this.

Accounting system security

Use password protection, two-factor authentication, and role-based permissions to limit access to all systems containing financial data about your business. Additionally, keep the system up to date with regular patches and upgrades to protect against the latest security threats.

Processes for approval

A strict process for approving expenditures and transactions can prevent unauthorized spending. This process should include verifying the legitimacy of invoices and purchase orders, ensuring that the company is getting the best possible price, and requiring a second set of eyes for all high-value transactions. As always, let your accountant know about all large purchases.

Employee training

Invest in training for all employees who handle financial information or are involved in financial processes. This should include training on the importance of internal controls, how to recognize fraud, and the rights and responsibilities of employees when it comes to their role in maintaining controls.

I have only touched on a handful of the important internal controls that can benefit your agribusiness. However, even getting started with just a few controls in place can jumpstart the safeguarding process. Contact your accountant for more assistance with this exercise. As always, I am here to help as well.

Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.agribusinessaccounting.com or www.HolbrookManter.com.

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