Internal Audit in Family Companies: Silent Hero of Safe Growing

Internal Audit in Family Companies: Silent Hero of Safe Growing

Family businesses are initiatives that constitute the backbone of the Turkish economy and kneaded with strong values. However, this strong structure has some weak points in terms of sustainability and healthy growth. One of these weak points is a lack of internal audit. So what is internal audit, why is it so important and how should it be structured in family companies?

In this article, we offer a comprehensive perspective with the importance of internal audit in family companies, its place in institutionalization, difficulties encountered and implementation suggestions.

What is internal audit? Why is it vital for institutionalization?

Internal audit an independent and objective assurance mechanism that evaluates the effectiveness, efficiency, legal suitability and risk management of an enterprise's activities.

Internal audit for family companies;

• Providing financial discipline,
• Prevention of errors and abuse,
• Control of effective use of resources,
• It is indispensable for the construction of corporate memory and process safety.

Institutionalization is not only by drawing an organization scheme; processes, controls and accountability. This is where the internal audit the silent hero .

The main problems faced by internal audit in family companies

The implementation of internal audit brings some special difficulties, especially in family companies:

1. Conflict of Culture of Trust by Audit

Since there is high confidence between family members, the control can be perceived as "insecurity". However, control is not to damage confidence, but to protect the system.

2. Inadequate structuring

In many family companies, there is no supervision unit at all, or it is seen as the additional task of only financial affairs personnel. This reduces the activity.

3. Boss's intervention area

The desire of the founders to dominate everything blocks the way of independent control. However, healthy growth is possible with system -oriented management, not an individual.

4. Authority-Outside Conflicts

In cases where the positions and interests of family members are conflicted, it may be difficult to conduct objective control.

 

What does internal audit earn?

Internal audit makes the following contributions to family businesses when it is correctly constructed:

1. Sustainability and Corporate Assurance

Continuous monitoring and development of processes facilitates the healthy transfer of the company to future generations.

2. Cost control and profit increase

Internal audit detects unnecessary expenditures and prevents waste. This is directly reflected in the land.

3. Risk Management

It prevents crises by detecting errors, abuses and legal incompatibilities at an early stage.

4. Investors and Bank confidence

A transparent and supervised structure increases the financial reputation of the company. This provides easier access to outsourcing.

5. strong transition between generations

Internal audit enables the system to survive during the intercreation period management period. It is one of the cornerstone that prevents the company from disintegration after the founder.

What needs to be considered when establishing internal supervision in family companies

Family businesses who want to implement the internal audit mechanism should follow the steps below:

1. Create an institutional awareness

A culture that defines control as “development” should be created, not “finding errors”. Trainings and consultancy support are very valuable at this point.

2. Stay loyal to the principle of independence

The audit unit must be directly attached to the board of directors and should not be affected by the executive boards.

3. Establish the competent inspection staff

An internal audit team should be established in the field of experienced, analytical thinking skills and dependent on ethical values.

4. Prepare audit plans

Annual audit plans should be prepared according to risk analysis; In addition to financial audit, process, operation and compliance controls should be covered.

5. Install the reporting and tracking system

The results of the reports prepared after the audit should be monitored and the corrective actions should be followed clearly.

Internal audit should get its share without digitalization

With the development of technology, the use of digital vehicles has gained importance in internal audit.

Thanks to ERP systems, internal control software and automatic reporting tools, inspection has become more effective and less resource.

What family companies should do at this point is to integrate digitalization not only to areas such as accounting and production, but also into control.

An example of real life: the structure strengthened by internal audit in the family business

The second generation family company, which operates in a food sector, has started to experience financial losses during the growth process. There was no audit mechanism, unregistered transactions and invoice shifts caused serious damage.

As a result of the analyzes, it was decided to establish an internal audit unit in the company.

An independent internal audit unit was established and with the studies carried out;

Within 6 months:

• Cash outputs were controlled
• The company's net profit rose by approximately 30 %
• The founder began to focus on the future strategies, not the company's work (this place has a separate meaning)

Today, this company is an exemplary corporate family business where investors are interested in.

Conclusion: Internal Audit is the future insurance of family companies

Internal audit in family companies is not just a control mechanism; At the same time, it is the key to walking with confidence in the future, putting the company on solid foundations, interpersonal sustainability and institutional reputation.

Today, family businesses, which see internal control as a cost, may have to pay much larger costs tomorrow. However, on time and conscious steps can prevent great crises.

The essence of the word;

> A well -controlled company is a well -managed company.

Strong control is the guarantee of healthy growth.

 

 

 

 

Internal Audit in Family Companies: Silent Hero of Safe Growing

Growth in family companies often comes with great excitement and sometimes hurry. New investments, new branches, increasing turnover… However, the complexity of growth is often ignored. At this point, the internal supervision should be activated.

When it comes to internal supervision, some of them think of only control of accounting documents. However, internal audit is one of the most strategic ways to understand whether the functioning within the company is healthy, transparent and sustainable.

Imagine a family business: the founder father is still active, the second generation of administration is the third generation intern. Domestic relations and business relationships are intertwined. A reliable mechanism is needed to make this beautiful but complex structure sustainable. The internal audit is the silent hero who strengthens the roof of this structure.

Internal Audit; Not only to find the error, irregularity, but also to see the opportunities for improvement. Repetitions in the processes, workload imbalances, authority-decision-free incompatibility plays an illuminating role.

Moreover, if it is being worked with professional managers other than family members, internal audit systems; It is vital in terms of trust, accountability and corporate culture.

Let's not forget: Institutionalization is not only a “drawing organigram, but also to build confidence with transparency, balance and internal control systems.

If we want to crack while family businesses grow, not to weaken in the shadow of family ties workload, we should see internal control not only “cost” but as a “investment ..

Because sometimes the fate of a company is hidden in the inability to notice and notice a risk that it does not see.

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