When it comes to running a business, many aspects of the business require the owner’s attention. When it comes to staffing a business in larger corporations, generally, the separation of duties is already done and even further focused on through the creation of departments that handle specific business operations.
When you apply this to a small business, the issue of separation of duties becomes more difficult. In many cases, small business owners can’t afford to have a large staff that can make the separation of duties much more accessible. Operating a business with a small staff causes some overlap in duties in that people on the team have to do the job of more than one person. It is possible to deal with the separation of duties by equally dividing the duties among your staff.
The division of duties must be fair, and you may need to alternate duties to ensure fairness in delegating duties. The focus must be on what is best for business operations and what will prevent burnout, errors, or fraud among the available staff.
Application in General Business and Accounting
In general, in business and accounting, the segregation of duties serves two essential 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 essential phenomenon as it involves the separation of three main functions:
- Custody of assets
- Authorized use of assets
- Keeping records of assets
Although separation of duties is difficult to achieve in small business, it should be implemented as much as possible to improve the performance of the employees in the organization. Also, another purpose that separation of duties serves is to avoid burnout or one employee getting more than their fair share of the duties.
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 financial transactions. This compression of duties often happens in small businesses as there aren’t many employees. That is why setting clear roles and responsibilities for each job is essential. This definition of roles gives employees a thorough list of the tasks they are expected to do and when they should perform them, as well as review 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 to improve their skills and deter the staff from committing fraud. This accountability also allows employees to be recognized for the work they do. If everyone has their hands on every task, it can cause some employees to take on more than their fair share and cause them to feel underappreciated.
Employee Accountability
When this process is implemented, the credibility of accurate financial reporting is vastly increased. This credibility reduces the risk of fraud as it assures the creation of a culture of accountability. It protects the business from any type of unnecessary or unplanned loss. Separation of duties can increase efficiency towards the aims and objectives of an organization. This increase in efficiency 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 stop one person from gaining complete control over a single process. Therefore, the opportunity for fraudulent behavior is reduced.
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