How to do Internal Control of the Company

Internal control include the process, policies and procedures to ensure the reliability of the financial reporting provided by the company. These systems are mainly established to safeguard companies compliance with the rules and regulations prepared by various external organisations of authority, to maintain the effectiveness and efficaiency of company operations, and overall soundness of the company.

Process of doing Internal Control of a Company

1. Choosing a target process

The first step we will need to take is to choose the type of process to focus on. This include figuring out the tasks to focus on, and then sorting them on the level of priority. The first thing we need to do is choose a process to focus on. There are various types of processes that we can choose from.

Operational processes

Administrative processes

Customer management processes

Social processes

Innovation processes

Regulatory processes

This might be a particular area of your business with a known problem, or it might simply be one of the most widespread, large-scale tasks your team carries out.

2. Setting high-level goals

After you have selected the process to focus on for company efficiency, the next step includes making a list of goals that are needed to be achieved. We’ve touched on this to some extent already when we talked about the reasons why you’d want to pay attention to your internal processes in the first place.

Cast your mind back to some of the ideas we thought about earlier.

We’ll flesh our goals out into more specific targets a little bit later, but for now, we want to get a picture of what we’re trying to improve – whether this is efficiency, accuracy, consistency, cost-effectiveness, or something else.

3. Documentation

Now, We would want to make a descriptive document on the process functions currently without any changes. This does not include the  analytical work but just a picture for visualizing the processes happening inside a company.

In Descriptive terms , we will need to know every actions happening in its order, who is in charge of the action, the list of things involved in the process and the reason for it to happen.

Documenting the process would be the easier task, the challenge would be to document the reason for the action is being taken as that would  require a certain level of analytical mindset.

We can point to a few basic types of logic that can govern the structure of internal processes. Broadly, we’ll be dealing with some combination of the following:

• Success/failure criteria – Whether or not a step has been completed successfully and the task can progress.
• Branching logic – If/then rules that determine which step to go to next based on defined criteria.
• Looping logic – Conditions that govern whether a particular step or action should be repeated.
• Escalation rules – Situations where issues need to be raised with a higher authority.

4. Process analysis and defining specific goals

Once we’ve got our existing process thoroughly documented, we can start to think more analytically. Our next challenge is assessing how effective our present process is, as well as thinking about how it could perform better.

The more detailed the documentation we created in the previous step, the better. We also need to circle back to our overarching goal here. By the end of our analysis, we’ll have fleshed this out into more specific, measurable targets.

Analysis requires us to assess how we’re stacking up against whatever goal we have in mind. So, if we’re trying to reduce what a particular internal task costs us, we’ll need to measure all of the costs associated with each constituent step.

What we’re trying to do is quantify what’s working and what isn’t – with the more specific goal of identifying opportunities to improve.

We’ll deal with deciding on specific interventions in a second. For now, the idea is to decide the extent to which we think we can improve. For instance – by aggregating all of the extraneous costs, time usage, or incidents.

Then we can calculate what proportion of the bigger picture is accounted for by these, and use this as the basis for setting SMART goals for our internal process improvements.

5. Non-technical interventions

Now, we’ve got hard figures for what we want to achieve. It’s time to put a plan together for how we’re going to make it a reality. As we alluded to earlier, it’s vital to get things in the right order here.

Again, we need to start by getting the process itself right – whether this means a wholesale redesign or simple changes, like altering its internal roles and responsibilities.

But how do we decide which non-technical interventions are right for us? Often, the best option is taking an inductive approach. So, we can return to our analysis and start thinking about why particular aspects of our internal processes perform the way they do.

For example, a particular decision point might take an excessive amount of time purely because we ask too many people for their input. An easy process-level change would therefore be reducing this to what’s strictly necessary.

Similarly, if we knew that a particular step cost us an outsize amount, but didn’t really provide any actual value, we might consider eliminating it completely.

Or, we might alter the governing logic so that it only occurs in situations where it will provide value.

By the end of this stage, we should have identified and mapped out any process-level changes that we want to implement. The result will be that we have an improved, more efficient process model, at least in the abstract.

The next step is to think about the technical interventions we can use to make the most of this.

6. Technical interventions

Technical interventions are arguably the more exciting part of internal process improvement, but we should stress again that they must come after the non-technical interventions. We don’t want to throw money at processes with bad fundamentals.

We saw some of the most common kinds of technical strategies we can leverage a little bit earlier, including creating internal tools, self-service UIs, and automated solutions.

However, the question of deciding on the right technical interventions is much more complex than with their non-technical counterparts.

For sure, we have quite a few more concerns to balance anyway.

The most obvious distinction here is that technical interventions are generally going to be more expensive. We don’t necessarily need to pay anyone to redesign an approval workflow, but a new application to automate it would come with either a license or a development cost.

Therefore, we have a far greater impetus to achieve cost-effectiveness. Basically, the stakes are higher – we have a greater risk of wasting our money.

Besides this, we’re also more likely to encounter issues with dependencies, compatibility, extra training needs, scope creep, and project spillover with digital solutions. So, in digitalizing one process, we might find that we need to invest in solutions for other related processes.

And we quickly find ourselves with snowballing costs.

So what do we do here? Obviously, we can’t give a complete account of everything you need to know about IT procurement. But – we can point to some important rules of thumb and best practices to help safeguard your ROI.

Most of all, it’s important to prioritize agility in any process transformation project. It’s normal that new requirements or unforeseen issues will arise as a project progresses – at least to some extent.

So, what’s important is how we manage this. If we indiscriminately actioned every change request, our project scope would quickly get away from us. On the flip side, if we stick religiously to the original spec, we might not deliver a solution that offers any real value.

The key, therefore, is to take a balanced, case-by-case approach, while prioritizing real-world business value for end users.

7. Implementation

Once we know the exact mix of interventions we’re going to leverage in our new internal process strategy, it’s time to put it all into action. This is what’s known as the implementation stage.

Of course, the problem is that this could mean a huge array of different things in practice – any action you might have chosen in the previous step will come along with its own unique implementation hurdles.

But are there any broad lessons we can learn here?

When we really zoom out, we can essentially break implementation into three categories:

1. Procurement – This is when we need to source a new tool or some other resource in order to bring our changes to life.
2. Policy – Policy changes are when we alter the process itself, including any rules governing it.
3. Training – Training simply means making sure that your team has a clear picture of how your internal processes work and why they must follow certain procedures.

Again, there’s huge scope for variation within each of these.

Take procurement. Chances are that if we opt for an off-the-shelf solution, there might be dozens of options, each with its own tradeoffs. We’ll also need to deal with the operational side of dealing with the relevant vendors, including any internal vetting policies.

For policy-level changes to our internal processes, we’ll actually need to account for a broader range of challenges than you might expect. One huge stumbling block is how to measure adherence to our new process – and what to do about it if users aren’t complying.

More on this a little later.

Finally, with training actions, the most important thing is that we adequately adapt our approach to the needs of different colleagues and teams – both in terms of content and delivery.

So, your IT department might have very different training needs compared to your back-office admin team – even if they’re using the same new platform. This could equally relate to their technical skills, their needs from the platform, or simply their learning styles.

By the end of this stage, our colleagues will be using our new improved internal process in the real world.

8. Monitoring and continuous improvement

Finally, we must gather and analyze data around what impact our changes have had – if any. Remember earlier when we went to the effort of setting specific, measurable goals for ourselves?

Well, now it’s time to see how we’re progressing toward these.

The first thing we need is easy access to the relevant data. Moreover, we need to give the right people access to this data in a format they can understand and take insights from.

That’s right you guessed it, we need dashboards. These are dedicated interfaces that allow decision-makers to check on key metrics in real-time.

The harder part of the equation is deciding the actions that we’ll take on the basis of these metrics.

In truth, there are no easy answers to this one. Sometimes we might just want to make a couple of tweaks to make marginal gains. Others, we might need to go back to the drawing board entirely.

For our purposes, the important thing isn’t to go in-depth on every possible optimization. Rather, can’t overstate the fact that internal processes require continuous ongoing improvement.

Recognizing that we can always do things better is the first step towards embedding a wider culture of innovation across your organization.