General internal control problems and solutions of retail sector
editor: Mr. Frankie Chan - Risk Consultant
Major industries of Hong Kong have been developing prosperously whether it was the fishery and manufacturing industry in the past or the service industry at the moment, in particular retail sector which has grown very rapidly. Hong Kong is renowned as a shopping paradise selling various brands that are of good quality and attractive price. However, retail sector is now facing fierce competition. Apart from managing ever-changing economic environment, skyrocketing rents, and diversified consumption patterns, companies must also address the issue of retail sector management.
We would discuss general internal control problems and the solutions of retail sector in this newsletter. We suggest that related companies could read this newsletter, and strengthen their internal control, in order to reduce the risks associated with the companies.
Sales Management Performance assessment and monitoring – Customers value not only the quality and price of the goods, but also the service quality. Companies should regularly conduct performance assessment and monitoring for its shops. Nevertheless, it will be difficult to ensure whether the related performance assessment and monitoring has been conducted if written documentation is not prepared. In addition, it will be hard to follow up the process of improvements of the shops.
It is suggested that the companies should conduct performance assessment and monitoring regularly, and should prepare written documents to record the details, which should be signed by related representatives for confirmation.
Inventory Management Stock count – For retail sector, the most important asset for the shops is undoubtedly the inventory. Shops perform regular stock count of inventory in order to strengthen inventory management. However, the lack of written stocktaking record will make it difficult for the shops to determine if the physical quantity of inventory is in line with the accounting record.
It is suggested that the companies could establish documentation for recording the process as well as the result of stock count. The one who does the stock count and the one who reviews the stock count should sign on the record for confirmation.
Cash Management Cash deposit – In addition to inventory, cash is also one of the important assets in the shops. The shops will deposit the cash into the bank once the balance of cash reaches a specific amount. But if the shops do not make the deposit on a real-time basis, the risk of employee theft will probably increase and thus the revenue of the companies might be affected.
It is recommended that the companies should strictly require the shops to deposit the cash into the banks in time and establish a written record for details of every cash receipt to facilitate the checking of accounts.
Conclusion In addition to the quality and price of services and goods, customers also have preference for the brand’s reputation. If companies from the retail sector could pay more attention to internal control, develop solutions for the related problems, and put them into practice, then its reputation as well as the revenue will definitely be enhanced.
If there are any aspects which we may assist, please do not hesitate to contact our partner in charge Mr. Roy Lo at 3583 8048 (email@example.com) or our Risk Manager Ms. Gloria So at 3583 8517 (firstname.lastname@example.org).
SHINEWING Risk Services Limited
SHINEWING Risk Services Limited is an industry leader with many years of experience in risk management and internal control review services in China and Hong Kong. SHINEWING has maintained its leadership position in the market over the years.
Headquartered in Beijing and with branch offices in Hong Kong, Singapore, Australia, Japan, Shanghai, Shenzhen, Chengdu, Xi'an, Tianjin, Qingdao, Changsha, Changchun, Yinchuan, Kunming, Jinan, Dalian, Guangzhou, Fuzhou, Nanjing, Urumqi, Wuhan, Hangzhou, Taiyuan, Chongqing and Nanning. SHINEWING is ideally positioned to provide services for our valued clients.
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