Summary
In the following essay, we will talk about why it is important to have internal control in SMEs, this instrument, which should be established in every organization regardless of its size, aims to protect the resources of the company or business avoiding losses due to fraud or negligence, as well as detecting deviations that occur in the organization and that affect the fulfillment of the company's objectives.
Introduction
The importance of having an internal control system in small and medium-sized companies has been increasing in recent years, this being the part that is in charge of organizing the procedures and business needs, as well as safeguarding and protecting assets., verify the efficiency, productivity and custody in operations.
II.- Background
In the villages of Egypt, Phenicia, Syria among others, we observe simple entry accounting. In the Middle Ages, accounting books appeared to control business operations, it is in Venice where in 1494, the Franciscan Friar Lucas Paccioli, better known as Lucas de Borgo, wrote a book on double entry accounting.
It is in the industrial revolution when the need arises to control the operations that due to their magnitude were carried out by machines operated by several people.
The origin of Internal Control arises with the Double Party, which was one of the control measures, but it was until the end of the XLX century that businessmen were concerned with forming and establishing adequate systems to protect their interests.
What is Control?
It is a tool that helps the company to check that all its operations are carried out according to the plans, this being of utmost importance because if it is maintained optimally, better results will be obtained.
From an administrative point of view, the control consists of comparing the results obtained and those already foreseen in order to verify that the operations cover the established program plans, analyze the detected deviations and create corrective measures.
Control, its purpose is to ensure that everything in the company is working as it should, in accordance with the prescriptions of the plan and the programs that give content to its organization and the generally accepted principles of economics and administration. (Suárez, 1991)
Among the most accepted concepts that stand out with greater importance we find those of:
Gustavo Zepeda Alonso:
Internal Control is the set of plans, methods and procedures adopted by an organization in order to ensure that assets are properly protected, that accounting records are accurate and that the entity's activity is carried out efficiently and in accordance with the policies set out. by management, in accordance with the goals and objectives set. (Alonso, 1998)
José Alberto Schuster:
It comprises the organizational plan and all the coordinated methods and measures adopted within a company in order to safeguard its assets, verify the reliability and correctness of accounting data, promote operational efficiency, and encourage adherence to prescribed administrative policies. (Schuster, 1992)
Paul Grady:
Internal accounting control comprises the organizational plan and coordinated procedures used in the business to: safeguard assets from losses arising from fraud or errors, verify the accuracy and trustworthiness of the accounting data that management uses for decision-making and promote efficiency. in its operations and promote adherence to the policies adopted in those areas, in which accounting and financial departments have direct or indirect responsibility. (Grady, 2000)
Now that we know different points of view of the concept of internal control, it can be determined that:
Internal Control is the organizational plan, the coordinated methods and procedures, the assignment of duties, responsibilities and the design of accounts and reports used to ensure that assets are protected, confirm the reliability and accuracy of accounting data for decision making, promote that operational activities are carried out effectively, communicate administrative policies and encourage their compliance.
Importance of Internal Control
It represents an important part within any company, and that if it is based on the concept presented in the previous paragraph, we observe that it affects the policies and procedures and structure of the organization. The implementation of an internal control system increases operational efficiency and effectiveness, as well as reducing the risk of fraud.
The size of the Company is not a factor that will delimit the importance of the system since in organizations where there is a single owner who, likewise, makes the decisions, participates in the operation and requires an accounting system, as well as having a the most appropriate internal control system for this.
Having a suitable Internal Control for each type of company will allow us to maximize the use of quality resources to achieve adequate financial and administrative management, to obtain better levels of productivity; It will also help to have motivated human resources, committed to your organization and willing to provide quality services to the client.
Having an up-to-date control in the basic areas of the company will allow feeding the information system and helping to make adequate decisions.
Classification
By its area of application:
- AccountingAdministrativeOperativeBudgetComputingManager
By its use:
- General Specific Preventive Information Continuous Sporadic By system External to the system
Elements
Internal Control is made up of several elements that will allow evaluating the results obtained in the performance of the functions of each of the members and the areas of the organization, the elements are the following:
- The organization plan Authorizations and procedures Personnel Supervision
Internal control differences between large and small companies
Small companies have the same need for good internal control as large companies, even though large companies may often have more stringent internal and external reporting requirements. The main differences are:
- Less formal communication process; communication is normally oral Supervision by senior management (usually the owner) The management style is direct, that is, there is not much delegation of functions Few management levels Control procedures and segregation of duties are not so extensive Self-assessment processes are less formal.
Small businesses often specialize in a single product or service and often operate from one location. The fact that within these entities there are few collaborators limits that a formal segregation of functions is practical. Supervisory controls are exercised day by day by the owner-manager.
The importance of internal control in small businesses has increased as a result of the fact that they have to comply with certain legal provisions and needs in their administration.
III. Development
Internal control in SMEs is of the same importance as in large companies, in the country 97% of companies are small and medium-sized, which provide 64% of the country's job sources, most of the small medium-sized companies do not They have a clear management system, there are no written objectives and plans for the entire company, they work reactively solving problems as they arise, investments are not planned, departments are created improvisedly, management is carried out empirically, there is no adequate command, motivation, communication and supervision.
Control is scarce, there are no de facto norms, results are not carried out to plan actions. Consequently, there is no internal control in the economic entity, which allows the director or owner of the company to evaluate each of the areas that make up the company and therefore lead him to make decisions that help him to make decisions when respect. All this is due to the fact that because they do not have a control process in the organization, because they consider it not necessary, small companies do not really know which are the areas of opportunity and improvement in which they should work.
However, even knowing that internal control is of utmost importance in companies regardless of their turn or size, they are not given due importance in small companies because they are properly familiar and do not consider that they have to carry out carried out as such. Without realizing that having adequate internal control for each company allows maximizing the use of quality resources to achieve adequate financial and administrative management, to obtain better levels of productivity; It will also help to have more trained, motivated and committed personnel with the organization and willing to provide quality services to the client. For the same reason, having an updated control in the basic areas of the company will allow to feed the information system and help to make adequate decisions.
It is important to mention that internal control is a tool that will help the owner or director of the company to know in which part of the processes is failing and what measures to take. It is worth mentioning that most companies do not have any type of internal control system because they do not consider it necessary and that this also generates a cost. Without taking into account that the internal control system in organizations has been increasing over time, as it is very useful that it includes the organization plan in all the methods and procedures that are adopted in a business in a coordinated way, to protect and safeguard assets, verify the accuracy and reliability of accounting data, as well as bring efficiency,productivity and custody in operations and the demands ordered by the administration.
It is worth mentioning that internal control will always be a fundamental part within any organization, which aims to protect the resources of the company or business avoiding losses due to fraud or negligence, as well as detecting deviations that arise in the organization and These affect the fulfillment of the company's objectives.
IV. conclusion
In small and medium-sized companies, it is necessary to have an internal control system that allows evaluating each of the areas that make up the organizations regardless of their size and business, since the evaluations obtained will be very useful to the director or owner to decision-making, as well as to detect in which procedure or process is failing and improve it and solve this problem, not to mention that internal control aims to protect the resources of the company or deal.
V.- References
- Alonso, GZ (1998). Audit and Internal Control. In Audit and Internal Control. Mexico: McGraw Hill. Grady, P. (2000). Fundamentals of Auditing Financial Statements. In Fundamentals of Auditing Financial Statements. Mexico: Efacsa.Schuster, JA (1992). Internal control. In Internal Control. Mexico: Macchi. Suárez, AS (1991). The modern audit a conceptual and methodological analysis. Spain: McGraw Hill.
