Motivating Change: Improving Performance From the Inside

September 16, 2008

Improve performance by strengthening internal controls
By Joyce Harper

Most well-run organizations audit their financial records to validate financial controls and preserve financial transparency. Yet, without operational audits of day-to-day processes, which often become mechanical, many companies find themselves exposed to substantial loss. Such losses may be realized through underutilized systems, undetected fraud, stagnation or abuse of resources.

Strong internal controls provide valuable safeguards to maintain the integrity of established policies, processes and functions. And while it’s true that faulty financial controls could damage a company; faulty management of internal resources, on the other hand, can completely destroy a company. An audit of internal controls evaluates the effectiveness of internal operations, analyzes internal procedures and uncovers potential cost saving process improvements.

An Inside Look

Internal controls are the processes enacted by an organization that dictate work flow, lines of authority, segregation of duties, the proper use of tangible and intangible resources, and the like. An independent evaluation of these controls plays an important part in restructuring or refining process flows, preventing or detecting fraud and in protecting the organization’s reputation, as well as its assets.

As business managers look for new and improved ways to reduce costs and become more resourceful, an audit of the company's internal operations could uncover opportunities to streamline procedures and eliminate wasted resources. Operational audits are designed to add value and to improve operations by providing a systematic, disciplined examination of established processes. An audit of internal controls can also add value in the following ways:

• Uphold the Basics. Companies often find that over time the processes and procedures that once dictated how to get the job done have become watered down and insipid; which leads to shortcuts, mistakes, overlooked opportunities and personal interpretation of the rules. Operational audits help uphold established procedures and maintain individual accountability.
  
  

• Uncover Problem Areas. Whether it's increasing complaints about a product line, a business unit that's underperforming, or a damaged process that continues to cost the company in time, effort or money, an audit of internal controls could identify the root cause of operational problems and help neutralize the risk of continued loss.
  
  

• Reduce Risks. When an organization makes maintaining internal controls a priority, the risk of costly errors, waste, or abuse of the system decrease dramatically. Strong internal controls ensure, with reasonable assurance that businesses will operate effectively and efficiently, comply with industry regulations and continue to meet specified business objectives.
  
  

• Perform Preventative Maintenance. Cumbersome, out-of-date systems cause more problems than they solve. An independent audit can identify archaic procedures, as well as provide recommendations on systematic improvements that can streamline operations, cut turnaround time and increase productivity.
  
  

• Increase Profits. Cost saving process enhancement lead to improved performance, increase employee satisfaction and better productivity; which leads to a healthier bottom line.

Audits of internal controls can help enhance systems and prepare an organization for next-level growth. Small firms can catch potentially harmful process shortfalls or improve the current structure in preparation for new hires. Mid-sized firms can make cost saving adjustments that could increase efficiency and diminish waste. And large firms can audit overall operations or strengthen the productivity of an underperforming business unit. Whether a private or public sector organization, large or small, regularly scheduled, independent audits can help companies build on their core competency to create strong viable systems, purposely structured to meet the demands of a global market while preparing the organization for the challenges and changes inherent to a thriving business.

Joyce Harper is an online columnist for Sales & Marketing Management. She is the Founder/CEO of Sharper Solutions, LLC, a management consulting firm specializing in organizational development and strategic management. She works with companies nationwide helping them create organizational effectiveness and increase their revenue building potential.  Joyce is a sought after speaker, trainer and business consultant.  Contact her through the company Web site at www.sharpersol.com.