It is essential to separate employee duties in a business to help safeguard your assets, among many other beneficial components. Separation of duties can help you place internal controls over the assets of your company. Division of responsibilities can help you practice bookkeeping more efficiently and effectively as it prohibits the allocation of duties to one person.
The separation of duties ensures that no one person gets burned out, thus causing attrition. It also helps the business management team know where there are strengths, opportunities, or gaps that may require additional training or staffing. However, it is common for a business owner, especially in a small business, to take over duties they previously allocated to other staff members. The separation of duties must start at the top of the chain of command within a business. This prevents mistakes even owners can make because they are not defaulting to the staff they hired to be an expert in that department.
Application in General Business and Accounting
In general, in business and accounting, segregation of duties serves two key purposes. These purposes include an assurance that you can quickly review and catch errors if there is an oversight, and it also prevents theft and fraud. Separation of duties is an essential phenomenon as it involves the separation of three main functions: 1. Custody of assets 2. Authorized use of assets 3. It is keeping records of assets. Although separation of duties is difficult to achieve in small businesses, it should be implemented as much as possible to improve the performance of the employees in the organization.
Whether a business hires an accounting or bookkeeping expert or uses accounting software to keep their books, a clear separation of duties will help keep the books clean and accurate. This accuracy can be especially helpful to the business owner who is not an accounting expert.
Application in Information Systems
Business owners never want fraud to occur in their company. However, it can happen when a single person handles more than one step of the transaction style. This often happens in small businesses as there aren’t many employees. That is why it is essential to set clear roles and responsibilities for each job. This clarity gives employees a thorough list of the tasks they are expected to do when they perform them and reviews their work. It plays a pivotal role in the accountability of employees. Without various levels of responsibility, even the best organizations can be rendered meaningless. By separating the duties of employees, work performance is enhanced. Business owners should separate each employee’s duties so that their skills can be polished and to deter the staff from committing fraud.
When this process is implemented, the credibility of accurate financial reporting is vastly increased. This reporting reduces the risk of fraud as it assures the creation of a culture of accountability. It protects the business from any unnecessary or unplanned loss. Separation of duties can increase efficiency towards the aims and objectives of an organization. This division of responsibilities assures that your employees are not burdened with huge workloads, and you are providing a stress-free environment. Involving multiple employees in a single task can prevent any potential error. Including more than one person in the transaction, the cycle can stop one person from gaining complete control over a single process. Therefore, the opportunity for fraudulent behavior is reduced.
No matter the size of the business, separation of duties is crucial for every business. It increases productivity and efficiency, prevents hidden fraudulent behavior, and sets a standard for clear responsibilities. It also helps the accounting department be more accurate. There is no downside to separating duties in any business that has multiple employees.
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