5 Key Internal Control Principles Manufacturing Companies Must Consider!

If large manufacturing companies want to stay competitive in today’s business environment they need to continually work on improving production efficiencies, product quality and cost reduction.

Apart from the competitive business environment, large companies need to comply with a load of rules and regulations.  The Department of Labor (DOL) administers and enforces more than 180 federal laws.  These include the Fair Labor Standards Act (FLSA), Occupational Safety and Health (OSH) Act, Federal Mine Safety and Health Act of 1977e Occupational Safety and Health Act and many more.

In addition, publicly listed companies have to comply with the Sarbanes-Oxley Act.   The intent was to drive improvements in companies’ internal controls.  To comply with the Sarbanes-Oxley Act many firms adopted a recognized control framework.

The most common control framework that companies chose is known as the COSO framework.  The COSO framework was issued in 1992 by the committee of sponsoring organizations of the Treadway Commission (COSO).  Their Internal Control – Integrated Framework was referred to as “COSO”, but on May 2013 COSO issued an updated Internal Control – Integrated Framework (the 2013 Framework) to incorporate the changes and technology advances that have taken place and effected the business world.

The 2013 Framework provides more guidance to large companies to effectively put in place a robust system of internal controls.  It adds 17 principles that are necessary for effective internal controls, but also introduces 81 focus points that are typically important to establish an effective system of internal controls for large companies.

Large manufacturing companies now have the opportunity to implement some of these “best practice” principles and focus points at the operations level to improve on their efficiencies and effectiveness of internal controls.

The following 2013 COSO principles and focus points are more relevant to large manufacturing companies:

1.    The organization selects and develops general control activities over technology to support the achievement of objectives. (COSO Principle 11)

With today’s advances in technology, management needs to consider which technology solutions fit their business models best.  It is important to understand the risks associated with the different technology solutions available. Assessing and documenting controls over technology would greatly assist manufacturing companies to make the best decisions regarding technology.

2.    The organization identifies and assesses changes that could significantly impact the system of internal control.  (COSO Principle 9)

Manufacturing companies are faced with more changes today than in the past that could affect the system of internal control.  These can be grouped into three categories:

  • Changes in the external environment, such as availability of raw materials, new laws and regulations.
  • Changes in the business model, such as better technology solutions and higher quality standards.
  • Changes in leadership.

Understanding, documenting and communicating these changes to management will assist the organization to better manage these changes and control the desired outcomes.

3.    The organization specifies objectives with sufficient clarity to enable the identification and assessment of risks relating to objectives. (COSO Principle 6)

For manufacturing companies to achieve their manufacturing goals, sufficient clarity and understanding of the risks associated with these is essential.  Once the risks are properly identified and ranked, management can implement actions to mitigate these risks.

Specific focus areas such as tolerance of risk and the required level of precision in performance measurements could greatly improve the effectiveness of risk mitigating actions.

4.    The organization obtains or generates and uses relevant, quality information to support the functioning of internal control. (COSO Principle 13)

Control systems need to provide accurate, relevant and timely information to enable management to have a more pro-active than a re-active approach towards internal changes in the business.

5.    The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning. (COSO Principle 16)

As manufacturing processes and systems evolve and change over time, so should the internal controls and monitoring systems to stay current and relevant.   Regular evaluations and updating of internal controls are essential to ensure that internal controls are present and functioning.

Focusing on these key areas will enable large manufacturing companies to use their resources more effectively and help them to better define their operational goals and objectives to ultimately become more competitive and successful!

At LBA Haynes Strand we have a group of qualified and experienced professionals with internal controls and manufacturing experience to assist your manufacturing company to implement an effective and efficient internal controls framework. Click the button below for your no-cost consultation today!

Julie Ayers Named A Charlotte SmartCEO Inaugural Brava Award Winner!

Charlotte SmartCEO has announced the winners of its inaugural Brava Awards program. We are excited to announce that Julie Ayers, Principal Member of LBA Haynes Strand, has been named a winner! The Brava Awards celebrate the distinguished achievements of 40 high-impact business leaders across the Greater Charlotte area. Brava award winners combine their entrepreneurial spirit with a passion for giving back to the community. The winners are exemplary leaders of both their companies and their communities. Julie Ayers is among an inaugural class who collectively generate more than $24.69 billion in annual revenue and employs more than 53,800 individuals.

“Brava winners possess the hallmark qualities of successful leaders – vision, passion, compassion, dedication, perseverance. Each winner in this inaugural class exhibits these qualities in all facets of her life, from running her business to tending to her family and donating time and resources to philanthropic initiatives,: says Jaime Nespor-Zawmon, president of SmartCEO. “We are honored to recognize a group of Charlotte women who are truly making a difference in the world.”

In addition, our team congratulates the other 39 women recognized for the Charlotte Brava Awards. To celebrate this tremendous award with Julie Ayers, join us on September 13th at the Charlotte Brava Award Ceremony!  You can find more information, by clicking HERE.

3 Keys To Staying Relevant With Your Clients

Staying relevant with your clients is the key to success. This applies to not only retaining your clients, but to also getting referrals from your clients. So, how exactly do you do that? What does staying relevant or becoming more relevant mean?

You talk to your client, you master the industry the client is in, and you provide timely advice and tips that lead to productive results for your client. Ultimately you are building a relationship with your client. One that is built on mutual trust and knowledge share. In North Carolina, especially in the Charlotte and Triad regions, there are dozens of CPA firms that can handle a client’s tax or accounting needs, however client service is where LBA Haynes Strand stands out from the rest. We create strong mutually beneficial relationships with clients. We stay relevant with our clients, and we do that by focusing on three main client service aspects:

1. Industry Acumen

Staying up to date on a client’s industry, including threats and opportunities is key. This includes making your client aware of any changes or updates that they need to be aware of relating to their industry. We pride ourselves in having a diverse team that is able to handle client needs in a number of industries. Most specifically: Charter Schools, Construction, Manufacturing, HOA, Non-Profit, and Entrepreneurs. Our team attends regular seminars, conferences, and other events in all of these fields to stay up to date.

2. Client Collaboration

We cannot stress this enough… work with your client! Your client should feel comfortable to come to you regarding any problem or issue they have and before important decisions are made! Something we have found helpful with our clients is to hold regular planning sessions. These can be monthly, quarterly, semi-annually or just annually – whatever the client feels is necessary. When you sit at the table on the same team with your client, then you are much more likely to provide real value to your client.

3. Client Insight

Focus on the client! Focus on the client’s vision, short-term and long-term goals, and strategic initiatives to meet those goals. You must understand your client in order to provide great service! This can greatly help you, especially when it comes time to offer useful advice to the client. You cannot fully help your client if you don’t understand them.  We highly recommend to take this last step seriously and really get to know your client.

These three steps can greatly increase your relevance with your clients. Thus, creating an excellent client experience and one that will be mutually beneficial for years to come. We know because this is how we handle our clients. If you would like to discuss your tax or accounting needs with a member of the LBA Haynes Strand team, contact us for your no-cost consultation!