The internal controls for your winery are a set of accounting SOPs that you need to incorporate in order to protect your assets, maintain reliability, and ensure you are legal and tax compliant. Internal controls will also improve your internal operations efficiency and enable you to overcome accounting challenges in your business.
The 3 essential internal controls you need to incorporate in your small to midsize winery are – Detective Controls, Preventive Controls, and Corrective Controls. In this blog, we will take a closer look at each of these internal controls and how they can help you overcome challenges in your business.
Detective internal controls are investigative tools that shine light on the core problems in your accounting practices, as well as what is causing these problems. This is where the name “detective” is derived from. Incorporating detective internal controls in your business will highlight costly problems like fraud, quality control, and tax and legal non-compliance. This is important when it comes to accounting for wineries as the wine industry has specific tax and legal guidelines that need to be followed.
Use detective controls during your inventory accounting, internal audits, and spontaneous cash inventory accounting. Finding errors in these internal accounting practices through your detective controls can prevent any further harm and make sure the finances for your business are in order.
While your detective internal controls will shine light on errors in your accounting practice, incorporating preventive internal controls can stop these problems from happening in the first place.
You can incorporate preventive internal controls through separating your accounting team’s duties so responsibilities and recording tasks don’t become blurred. You can also put preventive internal controls in place through enhanced system security that limits access to your accounting records, or through double-entry bookkeeping that establishes a practice of go-behind accounting entry checks.
All of these uses of preventive internal controls can improve your accounting accuracy and prevent both internal and external fraud.
The third internal control that can help you overcome challenges in your business is corrective internal controls. These internal controls are used to address the errors found through detective and preventive controls.
Corrective internal controls typically start by dissecting the errors that were spotlighted through your detective internal controls. Once these problems are spotlighted, your corrective internal controls will act as a remedy through accounting tasks like physical inventory audits or tracking assets from step to step in your account process to see exactly where and why the error occurred.
Incorporating and monitoring the three internal controls we just reviewed can be a tough task for an already time-strapped internal accounting team member. It can also lead to conflicts of interest or further errors that need to be corrected. Consider hiring a quality control personnel or contracting a team of financial advisors for the wine industry. These personnel can review errors specifically pertaining to accounting for wineries and implement solutions.
Designing and incorporating internal accounting controls in your business can be a challenging task. Allen Wine Group is your team of knowledgeable and experienced financial advisors for the wine industry. We are here to help with your accounting needs. Contact us today to get started.