When you conduct any business, its stakeholders, managers and customers will expect efficiency, reliability and security. This is especially true of financial transactions. Internal control ensures all business or organizational processes meet these demands. However, it is important to identify internal control weaknesses within your setup. There are several means of spotting these deficiencies and information is available to help you. The Securities and Exchanges Commission, for example, has issued guidelines for monitoring internal controls.

1. Catalog your Internal Control Procedures

This will include documenting financial transactions, product design and testing, purchasing procedures and internal auditing. Know exactly what you are dealing with before you inspect the procedures further. Try to identify parts of the company or organization that may be at more risk than others. Also assess the design of your controls. This will typically include documentation, organization, the segregation of duties, feedback and training.

2. Conduct a Risk Assessment

Conduct a risk assessment for all of your control procedures. Identify the most probable failures within your business or organization. A risk assessment usually takes the form of a table. Each new risk is put into a row. To examine the risk, add a number of columns indicating what could go wrong, why, who is in charge of that particular process, who inspected it, solutions and when the responsible person took action.

3. Conduct an Internal Audit

This will include stock and asset inventories, cash reconciliation and accounts payable. Cash reconciliation means that the amount of liquid cash owned by the company is correct when compared to income and expenditures. Auditing accounts payable means checking that all payments are going to the correct company or individual. These should be cross-referenced against all financial statements both internal (accounts department) and external (banks).

4. Train and Educate Staff

Educate staff on modern internal control processes and methods. Internal controls, like many other aspects of business, constantly evolve. Notify your employees of any changes and keep them well trained. A lack of knowledge and training is a key reason for internal control failures. Test workers' knowledge and hold review sessions during staff training.

5. Conduct Regular Inspections

Monitor your internal control staff. Risk assessments are usually created by those doing the internal control. Monitoring or conducting external inspections allows for a third party to identify possible weaknesses the person or team in place has missed. These can range from the process itself to the supervision of those controlling it. An external auditing company usually performs such inspections. Most businesses have relationships with trusted external auditors.

6. Examine Customer and Stakeholder Feedback

Are there common complaints? Were there any breaches of internal control? For example, if a number of customers report the same product failure, such as a faulty button, you can work backward through your company's procedures to find the problem. This would typically mean reviewing, in reverse order, delivery, assembly, manufacture, testing and design.

7. Look at Departmental Reports

Are there areas of the company that have gotten worse or are not improving as expected? Such issues may be due to other factors but may also signal some kind of internal control failure. Each department is able to control and monitor what it does; but departmental reports need to be tied together to reflect the business as a whole. Examine whether each department has a strong enough mechanism for its staff to report control weaknesses.