There are a number of reasons why small businesses fail. One of them is the lack of financial and operational discipline on the part of business owners and managers. These deficiencies leads to very costly financial, legal and statutory liabilities.
Ope Babalola, Managing Partner of Constelor Investment Holding (and a consultant/mentor to SMEs in Africa for the past 15+ years), shares 5 reasons why all businesses need internal controls.
1. Protection of company, staff and management
When a company has controls, it is less likely to get into trouble from fraud and lawsuits.
2. Smooth running of the organisation
A company with the right internal controls has fewer things to worry about, and expends less mental energy.
3. Legislation
Internal controls ensure legal compliance (especially with statutory and tax related filings). These come in very handy to ensure that a company does not miss relevant deadlines.
4. Guidance and clarification
Controls remove all confusion from how the business should operate. Lack of this typically leads to failure.
5. Accountability
Everyone should be accountable to the business in general. Internal controls sets up accountability for everyone in business right from the leaders of the organization to the front-line staff.
Author: Samuel Yeboah
Sam considers himself a pragmatic idealist who is passionate about his Christian faith and building sustainable African businesses that do business the right way. He’s happily married with 3 wonderful daughters. The author is co-founder and managing director of ServLed Africa Ltd. Prior to co-founding ServLed, he served as COO of Rancard for 5 years.
