Effective Internal Control Systems and Optimal Processes and Procedures

How do firms choose their strategic control systems? What is the nature and function of strategic control systems? What are the critical elements of strategic control systems? What is the nature and function of internal control systems as critical element of strategic control systems? These strategic policy questions relate to the role of optimal organizational internal control systems, processes and procedures designed to create and sustain operational performance excellence that maximizes the return on investment and shareholders’ wealth while minimizing risks exposure and the cost of operations, simultaneously.

Clearly, effective internal control system is correlated with optimal operational performance excellence and critical to sound organizational systems and strategies designed to maximize the wealth producing capacity of the enterprise. In these series on organizational performance excellence, we will focus on the pertinent strategic control system questions and offer some operational guidance. The overriding purpose of this review is to highlight some conceptual framework, quality management theory and practice, strategic relationships, and industry best practices. For specific financial management strategies please consult a competent professional.

Internal controls as integral part of the strategic control systems is interrelated series of activities imposed on the standard operating procedures of an organization, designed to safeguard assets, minimize errors, and ensure that operations are conducted pursuant to standards. While strategic control systems establish standards and methods for measuring performance, determine whether actual performance matches the standard-expected performance, and execute corrective action, internal controls are designed to mitigate the level and types of risks to which an organization is exposed.

Further, while control systems ensure operational effectiveness, control activities frequently slow down the routine process flow of business operations, which may reduce its overall efficiency. Consequently, the design of internal control systems requires management to balance risk mitigation with operational efficiency. This process can sometimes result in management accepting a certain amount of risk in order to create a strategic profile that allows an organization to operate more efficiently and effectively, even if it suffers occasional losses because controls have been deliberately reduced.

Additionally, all organizational strategies subject to constrained optimization have costs and benefits. The critical question is: Do the benefits justify the costs? In practice, executive leadership applies the net present value approach to weigh the costs and benefits of structures, systems and strategies. The optimal option maximizes the net benefit by equating marginal costs and benefits.

Some Operational Guidance

In general, no organization is immune to misappropriation, embezzlement or corruption-whether it’s inadvertent or deliberate. Many organizations don’t assess misappropriation or corruption threats until they have already occurred. Effective internal control systems should be designed to mitigate the level and nature of risk which organizations experience. In practice, as integral part of internal controls, organizations leverage technology-enabled solutions to scan across the entire spectrum of operational risks, promptly.

The ability to identify potential high-risk internal and external transactions quickly before they adversely impact organizations is critical to optimal internal control systems designed to create and sustain operational performance excellence derivative of business intelligence, risks mitigation, data analytics and evidence-based knowledge driven effective organizational systems, processes and procedures.

Moreover, internal controls should provide the mechanisms, rules, and procedures implemented by organizations to ensure the integrity of financial and accounting information, facilitate accountability, and mitigate fraud and the entire spectrum of operational risks. Besides complying with laws and regulations, and preventing employees from misappropriating assets or committing fraud, internal controls should facilitate operational efficiency and effectiveness by improving the accuracy and timeliness of financial reporting. Effective internal control objectives should include regulatory compliance, accuracy, validity, physical safeguards, and error mitigation. Control procedures should include separation of duties, access controls, random physical audits, standardized documentation, trial balances, periodic reconciliations, and approval authority.

Controls should always include policies and procedures put in place to ensure the continued reliability of accounting systems. Accuracy and reliability are paramount in the accounting systems. Without accurate accounting records, managers cannot make fully informed financial decisions, and financial reports may contain devastating errors. Control procedures in accounting should be broken into several categories, each designed to prevent fraud and identify damaging errors before they become problems or crisis.

Control system should fully address regulatory requirements, meet stakeholder expectations and protect organizations from potential catastrophic financial and reputation damages. When properly deployed and integrated, organization’s risk mitigation, anti-misappropriation, anti-bribery and anti-corruption technology-based solution should use digitally enabled analytics and advanced monitoring tools to help organizations scan across the compliance and operational risks spectrum, so they can more intelligently anticipate, mitigate and manage risks.

While smaller organizations with limited resources cannot always afford elaborate internal controls including segregation duties and decisions, system of internal controls tends to increase in complexity as organization increases in size. Establishing standards and methods for measuring performance; determining whether actual performance matches the standard-expected performance; and taking corrective action should always be integral to effective internal controls.

Finally, internal control is most effective when it is embedded and supported by a culture of assessment and continuous improvement. Therefore, effective internal control should consist of an integrated process for assuring organization’s objectives in operational efficiency and effectiveness, reliable financial reporting, and compliance with laws, regulations and policies are being met. Controls should include effective use of firewalls and encrypted passwords that limit internal and external access to critical business intelligence, proprietary, accounting and other financial information. Systematic measurement, analysis, and knowledge management require internal control results to be collected, analyzed and used for continuous improvement.

In sum, control systems should provide processes and procedures by which an organization’s resources are directed, monitored, and measured. Internal control system should include human elements such as board of directors exercising effective oversight and independent internal auditors conducting random periodic audits and unscheduled verification. Control systems, processes and procedures are critical in detecting and mitigating high risk activities and preventing various types of misappropriation and protecting the organization’s resources, both tangible and intangible resources.

The Almost “Secret Ingredient” to a Highly Profitable Business

Recently, I watched probably one of my favorite movies of all time:

Kung Fu Panda.

Now, before you write this off as a stupid animated movie, there’s a GREAT business lesson hidden inside if you’re an expert, consultant, or coach.

Here’s the TL;DR version of the movie:

1) A big fat panda, Po, is “accidentally” picked to become the chosen one

2) His master, Shifu, doesn’t want to train him because Shifu believes Po was chosen by accident

3) The great master Oogway, however, tells Shifu that “there are no accidents”

4) Shifu finally teaches Po the art of kung fu. Eventually, Po is entrusted with the legendary “Dragon Scroll” which holds the ancient secrets to save the kingdom

5) Po opens the Dragon Scroll only to find… nothing… and realizes: “There is no secret ingredient.”

The essence is simple:

Po always had everything he needed to become “the chosen one.”

He didn’t need anything fancy.

What he actually needed was the right mentor and the right training program.

Here’s my point:

Just like Po realized that there is no secret to becoming the “chosen one.”

No matter what the Fakebook guru’s preach, there is *NO* secret “hack,” “funnel,” or “tactic” that will turn your business into a profitable one.

Of course, you *can* find new tactics, hacks, and whatever. But, if your foundation isn’t solid (i.e., if your strategy is weak). It won’t matter which new hack you try to install into your business.

Whether that’s Facebook hacks… webinars… Instagram… or, insert whatever new tactic the latest Fakebook guru’s try to shove down your throat. Eventually, it’s only a matter of time before your business crumbles beneath its own weight.

The closest thing to a “hack” that can take you from frazzled entrepreneur to profitable business owner is learning how to write emails that sell.

The only difference is that email marketing isn’t a hack… it’s a powerful strategy.

In my opinion (which, of course, makes it a fact).

This was true when I worked my corporate job and sold for millions of dollars by email and online marketing.

And it’s been true in my own business.

To round this off.

Take that to heart the next time you sit down to write your latest email designed to sell.

If you want to discover how to 2x your sales and get more clients for your business, my free online training session is a great place to start.

You’ll learn how to use the old-school principle of “Infotainment” to write emails that people LOVE to read. Including: How to write stories so compelling they immediately draw customers in – even if you’re not a professional writer… and much more.

Starting Your Model Car Collection With Style

It is a human desire to embrace speed and drape themselves in style. When looking at this through the acts of human nature, purchasing luxurious homes, fast cars and wearing bling is what makes us feel we belong. In many homes however, affording the fancy clothes and the fast cars is more of a financial dream than it would be a reality.

If this sounds like you and you have champagne tastes on a Pepsi diet, then there is a solution. For those who like the fast cars and the nice things in life, collecting model cars is a solution that can fit into your budget. When it comes to model cars, Porsche diecast models are possibly the first in the series you should collect.

When it comes to collecting model cars, we are allowing ourselves to expand our imagination as well as hold on to a piece of our dreams. Even though we can’t in most cases afford to purchase and maintain a Porsche, purchasing Porsche model cars is the next best thing.

Creating a collection

When it comes to these and other cars, it all comes down to creating a collection. When we put together a collection of different objects such as cars, we can tailor our likes and passions into a specific set. For example, is you like a specific year of model car you can focus on those. If you prefer a specific manufacturer, size, colour and more, all of these can be addressed when working on your model car collection.

Sharing your collection

Sharing your collection is a great way to enjoy your collection. When sharing your collection, you can do a wide range of different things. First of all you can create a room that is filled with what you collect. Your Porsche diecast models can be displayed on shelves, in glass cases and even placed in scenes that depict a great moment in your life or accentuate the model.

Telling stories

Most collectors will have a reason for their collection. The majority of people will want to tell stories of their past. For men, it is all about helping their dads work on similar cars when they were younger. For women, it may be a remembrance of their brothers or boyfriends who had one of these cars or even their own favourite car. Telling stories is a great way to have a visual to add to these stories as well as a constant reminder of pleasant events.