When to
Eliminate Controls
Notwithstanding the lengthy list of controls described in
the last section, it is also possible—even advisable—to remove controls. By
doing so, frequently you can eliminate extra clerical costs, or at least
streamline the various accounting processes. To see if a control is eligible for
removal, take the following steps:
-
Flowchart the process. Create a
picture of every step in the entire process in which a control fits by creating
a flowchart. This is needed in order to
determine where other controls are located in the process flow. With a knowledge
of redundant control points or evidence that there are no other controls
available, you can then make a rational decision regarding the need for a
specific control.
-
Determine the cost of a control point.
Having used a flowchart to find controls that may no longer be needed, you must
then determine their cost. This can be a complex calculation, for it may involve
more than a certain amount of labor, material, or overhead costs that will be
reduced. It is also possible that the control is situated in the midst of a
bottleneck operation, so that its presence is directly decreasing the capacity
of the process, thereby resulting in reduced profits. In such a situation, the
incremental drop in profits must be added to the incremental cost of operating
the control in order to determine its total cost.
-
Determine the criticality of the
control. If a control point is merely one that supports another control,
then taking it away may not have a significant impact on the ability of the
company to retain control over its assets. However, if its removal can only be
counteracted by a number of weaker controls, it may be better to keep it in
operation.
-
Calculate the control's cost/benefit.
The preceding two points can be compared to determine whether a control point's
cost is outweighed by its criticality, or if the current mix of controls will
allow it to be eliminated with no significant change in risk, while stopping the
incurrence of its cost.
-
Verify the use of controls targeted for
elimination. Even when there is a clear-cut case for the elimination of a
control point, it is useful to notify everyone who is involved with the process
in which it is embedded, in order to ascertain if there is some other use to which it is being put. For example, a control
that measures the cycle time of a manufacturing machine may no longer be needed
as a control point, but may be an excellent source of information for someone
who is tracking the percentage utilization of the equipment. In these cases, it
is best to determine the value of the control to its alternate user before
eliminating it. It may be necessary to work around the alternate use before the
control point can be removed.
Repeat this control evaluation process whenever there is a
significant change to a process flow. Even if there has not been a clear change
for some time, it is likely that a large number of small changes have been made
to a process, whose cumulative impact will necessitate a controls review. The
period of time between these reviews will vary by industry, since some have seen
little process change in many years, while others are constantly shifting their
business models, which inherently requires changes to their supporting
processes.
If there have been any significant changes to a business
model, such as the addition of new technology, the implementation of different
types of employment models, the opening of new company locations, or a shift to
outsourcing or contracting out various types of labor, conduct a complete review
of all associated process flows both prior to and immediately after the changes,
so that unneeded controls can be promptly removed or so that weak controls can
be enhanced.
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