When it comes to running a business, there are many aspects of the business that 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 operations of the business.
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 separation of duties much easier. To operate the business with a small staff causes there to be some overlap in duties in that people on the staff have to do the job of more than one person. Having said that, it is possible to deal with the separation of duties by instead, equally dividing the duties among the staff you have.
It is essential that the division of duties is fair, and you may need to alternate duties to ensure fairness in the delegation of duties. The focus needs to be on what is best for business operations and what will prevent burnout, errors, or fraud among the staff available.
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 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:
- 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 occur 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 it is essential to set clear roles and responsibilities for each job. This definition of roles gives employees a thorough list of the tasks they are expected to do and when they should perform them and 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 so that their skills can be polished and to 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 it can cause them to feel underappreciated.
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 type of 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.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-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure 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.