Internal Check
Internal control is incomplete without an internal check. It is the structuring of staff members' responsibilities so that each person's work is automatically and independently checked by the other.
An internal check is a system or process that is introduced with specific instructions given to staff as to their area of work with the ultimate goal of controlling and verifying their work and maintaining accurate records.
Internal Check With Regard To Sales
The internal sales check system should ensure that the following are taken into account.
1. Number the order and keep it in the Orders Received Book with all of the details.
2. A copy of the order with all essential information should be sent to the Despatch Department.
3. The Despatch Department should take the necessary procedures to ensure that the goods are packed in accordance with the order.
4. The Despatch Department's statement of goods should be compared to the customer's order, and then an invoice will be created in triplicate using carbon paper.
5. The invoice should be double-checked by a responsible person, especially the rates charged and the computations completed.
6. Entries should be made in the Sales Day Book using a copy of the invoices.
7. Records should be kept in the Products Outward Book when goods are dispatched.
8. The customer may be issued two copies of the invoice, one of which will be returned after it is signed. It'll suffice as a delivery receipt. For future reference, the third duplicate will be kept.
9. For all the products returned by customers, entries should be made in the Goods Inward Book. Credit notes should be prepared, and the responsible official should double-check and initial them.
10. Keep track of sales returns in the Sales Return Book by using credit notes.
Internal Check With Regard To Purchases
1. Buy Requisitions: The method for issuing purchase requisitions should be established. When a department needs products, the head of the department should fill out a requisition slip, sign it, and send it to the purchasing department. The request sheet should provide specific information regarding the quality, quantity, and delivery deadline.
2. Inquiry: The purchasing department inquires about the terms and circumstances of various suppliers' purchases. Tenders are often requested for these purposes. However, it should be mentioned who will open and accept the tenders. As a general rule, the lowest tender should be approved and a choice made.
3. Purchase Order: Orders are placed by the purchasing department and should be noted in the purchase order book. Prepare four copies of the purchase order. One copy will be forwarded to the vendor, the second to the retail department, the third to the accounting department, and the fourth to the buying department. Before the authorized person or director signs the purchase order, it should be reviewed by a responsible official.
4. Goods Receipt: Upon receiving goods, the buying department shall thoroughly inspect them before sending them to the stores, with an entry in the goods inward (receipt) book. The receiving department should be notified of the arrival of the goods.
5. Making Payments: The procurement department should double-check invoices before sending them to the accounting department for payment. The invoice should be compared to the purchase order and incoming inspection report by the accounting department, and the calculations should be double-checked. The invoice should be entered into the purchase book by the accounting department. Only the responsible official should write a check to pay the invoice.
A signing authority must check that the payment is correct at the moment of signing.
Internal Check with regard to Cash Transactions
CASH RECEIPTS:
1. Cash receipts should be handled by a separate staffer known as a cashier.
A preliminary note of the amount should be created as soon as cash is received. The cashier should not be allowed to keep money on his person. He should not be allowed to spend money or make entries in the ledger or other books of primary accounting.
2. Every day, all receipts should be deposited in the bank. Bank reconciliation statements should be prepared regularly to reconcile bank and cash balances.
3. Bank pay-in slips should not be generated by the same individual who is responsible for actual bank deposits.
4. Printed receipts should be used to acknowledge all receipts. All receipts should have their counter-foils kept in good condition. Receipts that have not been utilized must be preserved with a competent officer.
5. Rather than tearing out soiled receipts, they should be annulled. If any changes are made to the receipts that have already been written, they must be appropriately initialed.
6. Copies of previously issued receipts must be indicated as duplicates.
7. From time to time, a few responsible members of the firm should conduct a surprise physical check to verify the cash balance.
CASH PAYMENTS:
1. The person in charge of making payments should not be involved in cash receipts.
2. Except for small cash payments, all payments should be made by chance cheques as much as practicable. Order cheques should be drawn for payment, and they should be crossed as much as possible.
3. Arrangements should be taken to guarantee that payment vouchers are not offered for payment again and that such vouchers be stamped as paid before the cheques are signed.
4. An official should check the statements received from creditors and cross-reference them with invoices and ledger accounts, and only then should checks be made in the creditors' favor.
5. Only directors and senior executives should be able to approve payments of a particular kind.
6. Bank reconciliation statements should be made from time to time by authorities other than the cashier to reconcile bank and cash balances.
7. Bank checks shall be kept in possession of responsible authority and kept under lock and key.
8. For each payment, receipts should be acquired that is signed and stamped.
9. The receipts should be appropriately organized and stored using a file system.
10. Monthly or recurring payments should be paid on set dates to assure the availability of cash discounts.