Top 5 Reasons Internal Controls Are Important For Manufacturers

Internal controls are essential in the manufacturing and distribution industry because they will generally assist in achieving your business objectives. The five components of internal control are:

  • Control environment
  • Risk assessment
  • Information and communication systems
  • Control activities
  • Monitoring

Application of these components will greatly benefit your business.

Here are the Top 5 reasons internal controls are important for manufacturers and distributorships:

  1. Communicate integrity and ethical values. Express the importance of doing honest business to your employees by setting an example as an owner on how you run an ethical business.
  2. Financial reporting objectives. Understanding the basic financial reporting standards will help you approve the accuracy of the financial statements to be compliant with accounting standards.
  3. Active involvement in your business. Continuous involvement as a business owner will assist you to build client relationships which will increase your revenue.
  4. Segregate duties. Having checks and balances in place and providing training specific to duties and responsibilities of your employees are important to reduce fraud opportunities.
  5. Examine your business operations on a regular basis. Inspecting the efficiency of your manufacturing process will improve the quality of your product and will increase your cash flow.

For more information about internal controls call ELLS CPAs at (714) 569-1000.

By Rene Carlos



Marketing Director at ELLS CPAs

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