Annual budget as element for the internal control system

The annual budget does not only show the planned future of a company in terms of data but it also sets a cornerstone for the company's internal control system. The budgeting, including a monthly target-performance comparison also represents the minimum requirement of an adequate internal control system in terms of the §22 GmbHG.

What exactly is an internal control system?

The internal control system comprises all organisational measures and controls that
  • protect and safeguard the existing assets
  • guarantee the exact and prompt accounting
  • supports the internal enforcement of the corporate policy.
Furthermore, the internal control system facilitates the efficient organisation of the business processes and the risk management for protection from damage.

The most important principles are the dual control and the separation of duties. Dual control ensures that no fundamental case is conducted without countercheck. The separation of duties segregates the core business processes. For instance, the order processing, the accounting and the invoicing should be done by different persons.

With an internal control system that is adequate to the company size, the manager is also on the safe side concerning his duty of care, for liability claims as well as for fraudulent insolvency positions.

Should you need support in compiling your budgeting or in integrating the budget into the accounting for an target-performance comparison, we, and our consulting are at your disposal.