Internal Controls for SMEs: Simple Approval Systems That Prevent Fraud & Leakages
Most SME fraud/leakages aren’t “movie-style scams”. They’re simple: unauthorized purchases, duplicate payments, cash mis-handling, and silent margin leakage. The fix is not heavy bureaucracy — it’s clean approvals + segregation + proofs.
Controls should be simple enough to follow and strong enough to protect.
What “internal controls” mean (in plain English)
Internal controls are the rules and checks that ensure:
- Money is spent only for valid business reasons
- Transactions are authorized by the right person
- Payments match purchase orders / bills / receipts
- Records are accurate (so MIS decisions are correct)
The 5 most common SME leakage points
- Procurement: buying without approvals or at inflated rates
- Vendor payments: duplicate payments, fake bills, wrong bank details
- Cash/UPI handling: missing collections, no daily reconciliation
- Expense claims: inflated reimbursements, personal expenses
- Sales leakage: unauthorized discounts, credit notes, returns
Interactive Control Risk Audit (2 minutes)
Tick what is true today. You’ll get a score + next actions.
Approval Matrix Template (Ready to Implement)
This is the fastest control you can implement without expensive software. Set limits by category + amount + role.
| Category | Up to ₹25k | ₹25k–₹1L | ₹1L–₹5L | Above ₹5L | Control notes |
|---|---|---|---|---|---|
| Routine Purchases Stationery, minor items |
Ops Head | Finance + Ops | Director / CFO | Director | Always require vendor quote + PO. |
| Vendor Services Outsourcing, AMC |
Finance | Director / CFO | Director | Director + 2nd sign | Contract + scope + deliverables attached. |
| Capex Equipment, computers |
Finance + Ops | Director / CFO | Director + Budget check | Board/Owner | Budget approval + asset tagging + invoice verification. |
| Discounts/Credit Notes Sales leakage control |
Sales Lead | Sales Head + Finance | Director / CFO | Director | Reason code mandatory + monthly leakage review. |
| Payments Bank/UPI payouts |
Finance | Finance + Director (maker-checker) | Dual authorization | Dual authorization + call-back verification | Vendor master changes need separate approval. |
Minimum controls checklist (must-have)
- Maker–Checker: person who creates payment ≠ person who approves
- Vendor master control: bank account changes need approval + verification call
- 3-way match (where possible): PO ↔ GRN/Service proof ↔ Invoice
- Daily cash/UPI reconciliation: collections vs system vs bank
- Exception reporting: duplicates, over-limit approvals, missing documents
Want a simple control system that your team will follow?
We implement approval matrices, maker-checker payment workflows, proof discipline, and audit-ready documentation — without slowing your business down.