According to cliffsnotes.com, internal control is the process designed to ensure reliable financial reporting, effective and efficient operations and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorised use, acquisition, or disposal is also part of internal control.
#1: Have adequate documents and records
This'll help ensure your financial statements are accurate.
Controls designed to ensure adequate recordkeeping include the creation of invoices and the timely preparation of documents, says cliffsnotes.com.
#2: Segregate duties
This requires assigning responsibilities to different people. This helps to limit fraud and ensures there isn't any fruitless expenditure.
For example, the same person who is responsible for an asset's recordkeeping should not be responsible for physical control of that asset. Having different individuals perform these functions creates a system of checks and balances.
Overall, the best way to identify and establish effective controls is to continually assess the risk, monitor control implementation and modify controls as needed.
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