Internal
Control System is simply the means by which the resources available to an organization
is directed, monitored and measured. Many entrepreneurs do not seem to give Internal Control Systems
the importance it requires because of what i call “it does not bring
money” kind of attitude. 

They
rather focus their energy on their product and target market, but the lack of
internal control systems is usually at the core of why some businesses
fail. 

Internal
Control Systems are not only policies and procedures it helps organizations
accomplish their objectives in compliance with laws and regulations.

Key Components of an Effective Internal Control System

The Right Attitude 
The attitude of management towards internal controls is a critical success factor.
If the management is not in full support, the system fails even before it
starts. 

Risk Assessment
The level of risks the business is exposed to, must be ascertained by reviewing
the business to see where the critical risks lie. This helps to design controls
to address these risks. 

Control Activities
This is the use of available information technology to ensure that necessary
controls are put in place and are operating properly. For example, if a
business has a lean budget they can use free online software to collate their
information and curb the loss of data.

Information and Communication
Communication systems should be set up so that any shortfall is communicated to
management in a timely manner to ensure that issues are addressed on time. For example, this can be a system that allows employees to escalate
issues to management instead of through supervisors in situations where the
issue is not properly handled by the supervisors.

Monitoring 

A set of
processes has to be put in place to assess the internal control systems’ functionality on a
regular basis. This helps to spot issues on time.

Importance of Internal Control Systems 

 1) It protects the company’s assets from theft,
fraud, misuse etc 

 2) It increases revenue by ensuring that only authorized transactions take
place thereby saving the business funds. 

 3) It helps to cut-off unnecessary processes that hinder business operations.  

 4) It gives assurance that all transactions are completely and accurately
processed. 

 5) It ensures that transactions are adequately documented.

In
conclusion, internal control systems are important and they are necessary for
the sustainability and profitability of any business.