In any organization, internal controls and their maintenance are pertinent to the business process. These internal controls form the backbone of the process meant to fulfill business goals and keep track of operational priorities.
For appropriate design, its implementation, and perpetual maintenance of internal control within any organization, management must take important steps. These steps should have three main goals at their heart: accurate financial reporting, compliance with the applicable laws and regulations of the land, and maintaining a certain level of efficiency in the business operations.
This article aims to throw light on five areas of internal control where VAT can prove beneficial.
Five internal control management benefits of VAT compliance
Internal control management is important to the success of every organization. Value Added Tax (VAT) serve a significant role in internal control management if you kick off the process of preparing your organization of regulatory compliance. Following are the areas of internal which are covered under VAT compliance benefits:
1. Integrity reinforcement and HR policies
Internal controls revolve a great deal around the integrity and ethical values of personnel dealing with the organizational information in any capacity. This pool of team members includes the management as well as employees. Secondly, control difficulties are enhanced by inadequate Human resource policies.
Both these areas are automatically dealt with when you are focusing on the VAT process as a registered company. For this reason, when you are in the process of complying with VAT regulations, your organization gets rid of problems related to ethical codes of conduct as well as Human resource procedures.
2. Policies and procedures improvement
When you hire VAT consultants or auditing experts for your company to prepare for VAT filing or returns, they will analyze your organizational policies and codes as documented. Especially the policies that deal with fraudulent activities and punishments in case of any misrepresentations by an employee.
When the gaps and loopholes in the policy documents are highlighted, the professionals will provide suggestions and recommendations to make improvements in those terms and policies. In this way, VAT consultants in Dubai can help improve your organizational structure and policies and thus help improve the process of dealing with malpractices.
The procedures related to information and communication from top to bottom and vice versa is another area of internal control which you can look forward to enhancing with the help of auditing and VAT professionals.
3. Organizational structure maintenance
Who is responsible for what is a big question of most organizations if they do not have a regulatory body to adhere to. One of the biggest advantages to internal control of your organization will be this formulation of organizational structure.
Once a company has the clarity of who will report which issue to which authority, there will be a significant reduction in internal control issues. This setup of a structural framework is an additional benefit for internal control functions.
4. The framework of monitoring controls
Internal control functions like separation of duties, reporting personnel and responsibility assignment require monitoring. When you are setting up your organizational practices for compliance with VAT regulations, you involve the board of directors who review the functional performance under other internal controls.
In this way, the monitoring process of internal control functions enhances and provides you a chance to make the best out of the services of the outsourced audit committee. Thus participation of those involved in corporate governance becomes more pronounced with the VAT compliance process.
When the top officials are cognizant of operations at all levels, it serves the purpose of adequate quality assurance for all internal control areas within the organization.
5. Responsibility assignment
For the best function of the business process, separation of duties, and decentralization of authority is important. There needs to a proper division of responsibilities in an organization, and each person with a certain duty shall be answerable for their particular craft. VAT compliance has at the foundation, a structural framework which involves an adequate framework for responsibilities from data collection, bookkeeping and analysis, and reporting.
When the responsibilities are assigned for adequate compliance under VAT regulation, your organization will be better able to carry out risk assessment procedures as well. Better control activities, e.g., policies and procedures, will set your business on the trajectory to achieve success according to its goals and priorities.
Is your organization’s internal control active?
Keeping internal control functions intact to the benefit of your business can be a challenge. For VAT compliant businesses, however, one comes with the other. When they register for VAT and start preparing their policies and practices suited to regulations of the native land, the procedures and practices begin to take a favorable shape for internal controls.
From quality assurance to adequate information communication without any misrepresentation, VAT has a lot of benefits for your organization. Thus do not consider VAT as a burden at all.