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 your company’s assets. Separation of duties can help you practice bookkeeping more efficiently and effectively as it prohibits the allocation of responsibilities to one person.
Application in General Business and Accounting
In general business and accounting, the segregation of duties serves two key purposes. These purposes include an assurance that you can review and catch errors easily if there is an oversight, and it also prevents theft and fraud. Separation of duties is an important phenomenon as it involves the separation of three main functions: 1. Custody of assets 2. Authorized use of assets 3. 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.
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 gives employees a thorough list of the tasks they are expected to do when performing them and reviews their work. It plays a pivotal role in the accountability of employees. Without various levels of accountability, 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 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 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. Involving more than one person in the transaction cycle can prevent one person from gaining complete control over a single process. Therefore, the opportunity for fraudulent behavior is reduced.
If you do not have a separation of duties, the operations of the business are severely impaired. As a business owner, you should be delegating work in everyday business operations and not doing it yourself. The attempt to do it all without help or delegation will result in burnout, chaos, and ultimately business failure. It is very common for business owners to be hesitant to give up tasks. The business is often an accumulation of their life’s work. Owners must hire good staff and be willing to delegate work to them and hire as much staff as needed to divide the tasks and ensure the tasks are fully realized daily, weekly, or monthly.
There are many reasons there should be a separation of duties within a company. This separation begins with recognizing that there are tasks that an owner should not be taking on themselves, such as accounting or other vital duties. Also, if an owner is trying to do everything regarding operations, this can lead to the business’s failure. Employee accountability is another significant reason to separate duties. It is easy for things to fall through the cracks if people don’t have defined duties or tasks. The separation of duties must be a priority when you have staff.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.