If the business is large or small, the same basic principles and practices of internal control applicable. One of the main components of internal control is cycle.Large bills or small, the concepts of control are the same whether a business is large or small, operating from a separate area or operating from home, the same basic principles and applicable internal control practices. One of the main components of internal control is the accounts payable cycle, which covers purchase and cash disbursement functions. Although the internal control measures in the process can be concentrated in one person, in the case of a home-based business, or a just a few people in a small company, these measures are inherent in the decisions to be made and actions taken. Segregation of duties, which would apply in a larger business, may not be practical or possible in a small business, but being aware of the different aspects of internal control will help to define more clearly the decision-making process, keep your small business on track, avoid unnecessary costs or losses, and make more efficient use of resources. Making decisions based on a home-based business or a sole proprietorship, accounts payable controls, probably come down to the decision of whether to spend a certain amount of money on a particular topic. This decision actually involves a process of control in the sense that it has some basis for making the decision. A cash payment that should not be perceived as a decision made at the time of purchase of goods or pay for services. The actually dates back to its business plan. All disbursements made in your small business should ultimately be justified on the basis of your business plan - its goals and objectives, and course set for their achievement. Stay on Course Management is the key - what direction is going, and where its source address. In the case of an individual or business at home, for example, that are the source of its own address. You decide where it goes and how you want to go. Maintain a clear focus in your direction will help you avoid making unnecessary or unproductive expenditures, and turn the course you set. His work will focus on making the expenditure that is necessary and reasonable to help you achieve your goals. Flexibility with a solid foundation of a course for a degree of flexibility should be integrated into any system, to seize the opportunities that present themselves, to respond to market changes and to adapt and adjust as your business evolves and grows. But having a framework in which to evaluate decisions on disbursements, once again takes you back to your original plan. If your plan has to be changed or adjusted, then that becomes your new plan and new management approach and its framework for decision making. This is a dynamic and ongoing process, but nevertheless is a process that requires careful thought and planning, not spontaneous decisions. Time is often critical in a fast business or market, where delaying a decision could mean missing an opportunity. Complete cycle therefore has to be so dynamic. With a little forethought, you can create flexibility in the system without sacrificing the element of control. And when you are clear about your goals and direction, the time required to evaluate a decision regarding the disbursement is reduced. You know what the payment fits into your overall business strategy. And as you gain experience and knowledge of your business, you develop an instinct for what the expenditures are necessary and reasonable. An instinctive decision is actually based on an accumulation of knowledge and experience, and is not the same as an uninformed decision. Instinctive decision-making has a greater importance in a fast paced environment, but needs the inherent framework provides a system of internal control, together with his knowledge and experience to make these decisions. The Business Plan as the starting point of clarity about its goals, objectives, and direction comes from going through the process of developing its business plan. This is where you think through the product or service offered on the market, what is needed to produce the product or deliver the service, the resources required to do so, and the efficiencies you expect to use in their favor . The business plan could be considered a target description (goals and objectives of the business) and business strategy as a means to get there. This leads to the development of a budget, what could be considered as a map, which leads to his destiny. To determine the resources it needs, it makes a distinction between capital costs, initial costs and operating expenses. Some items, expenditure on capital goods, contribute to your business over a sustained period of time, while other items, operating expenses, will be needed to maintain current operations, will have a shorter turnaround time and repeat . The budget as a budget tool should not be so rigid as to restrict or limit a business, or keep them from taking advantage of opportunities that may arise. But if it is unrealistic and definitely a budget loses meaning and purpose. The budget changes must be made within the broader context of changes in strategy or direction. New roads can be built that lead to the same destination, shortcuts can be found, or additional destinations can be added as the business grows and expands. This leads to budget changes consistent with changes in the plan and strategy. The budget represents in concrete terms (but not set in concrete) how the plan will be carried out - what income to expect and what expenses should be made to generate such income. The budget changes the business plan in terms that can be put into practice in day to day operations of the business. In this sense, the budget should be seen as a practical tool to be used to move the business forward in the right way, and not treated as an element of deterrence, intended to limit the ability to make decisions and manage the business. Budgets, forecasts and projections of a budget for capital expenditures and start-up costs generally prepared once, when a company is starting operations. An operating budget is often prepared on an annual basis. Many changes can occur during the year. While some changes can be planned and programmed in the budget, must have other fluctuations that can not be easily predicted, such as changes in prices of materials and supplies, fuel costs and other expenses. And the sale price may need adjusting according to fluctuations in market conditions. Many companies have an annual budget, and then prepare quarterly and monthly forecasts to take account of these fluctuations during the year. In a home business or small business, time and effort in preparing these forecasts may or may not always be justified. The important thing is to be aware of these changes during the year and how they affect the company in general. For example, increases in the cost of materials and supplies you may need to be compensated by adjustments in selling prices in order to achieve the same end results. If a business plan that was submitted to lenders or investors contains a budget, the budget should not be altered, as lenders and investors will probably want a report that compares actual results with budgeted results sometime in the future, depending on funding for the business is negotiated. In this case, the fluctuations during the year can be managed more efficiently through the development of an updated forecast. Similarly, the cash flow projections will be directly affected by price changes and other fluctuations during the year, and business decisions are made in response to these changes. A cash flow projection should therefore be kept as current as possible. Again, if the business plan contains a cash flow projection based, this can be maintained for purposes of comparative information, with updated projections of cash flow added as business conditions dictate. Flow Control of the steps involved in a system of auditing accounts payable, or the thought process involved in making decisions, can be seen in terms of a logical flow, beginning with the business plan and ends with disbursement. This flow is as follows: 1. Business Plan 2. Business Strategy 3. Budget 4. Forecasts and cash flow projections 5. Orders 6. The quotations and 7. Comparison of competition 8. PO 9. Proof of delivery 10. Invoice Verification 11. Final Payment Results Within the overall context of internal controls, controls that apply to the accounts payable cycle affect, or are part of other controls, in the most general, such as analysis of variance of budget against actual expenditures or anticipated or projected expenditures compared to actual expenditures. Controls inherent in the accounts payable process will also be part of the comparisons and analysis of cash flow. The variance analysis should lead to productive information and practical steps and measures to be taken to improve the entire accounts payable process, always in line with the original intent expressed in the plan, and that leads to effective decision- decisions and ultimately more successful running of the company and the achievement of goals and objectives, and improved bottom line.
