Why SoD is Important for Your Business

In the simplest terms, Segregation of Duties is a concept that helps prevent fraud and corruption in businesses by preventing one person from having complete control over tasks. In other words, it limits the damage a corrupt employee can inflict on a company. It means splitting up specific duties so that multiple people participate in each task. The idea is to limit each employee’s access to resources while monitoring their activities to make sure everything adds up appropriately.

The basics of SoD Management can be applied to any type of business. Still, it needs special consideration for financial services companies since they’re responsible for handling other people’s money.

What’s The Point?

In short, the point of SoD is two-fold:

  • • Prevent fraud. The whole point of SoD is to create a system where no one person can commit fraud by themselves. It’s done by splitting up the fraudulent task among different employees so that even if somebody does try to commit fraud, it will be noticed immediately.
  • • Reduce liability. If you are ever sued, the segregation of duties reduces your company’s liability because it ensures an audit trail showing how all transactions took place.

If somebody working for your business tries to defraud clients or make bad financial decisions. Segregation of Duties could prevent the issue from spiraling out of control and costing your company thousands (if not millions) in lost revenue or fines required by law enforcement agencies like the FBI.

Why SoD is Important

Are you not sure why segregation of duties is important for your business? We will give you five reasons why it is integral to the growth and security of your business.

Avoid Duplication of Duties

Duplicating roles leads to conflict, errors, or fraud. Don’t hand out one role to many people. It’s dangerous! Two sides must be considered in segregation of duties: internal control and risk management. Internal controls limit access to assets – theft prevention, while Risk Management reduces the chance of mistakes being made by employees – accuracy prevention. 

Avoid Unauthorized Access

You can never know when someone might want to overstep his authority on something he shouldn’t do – even within your own company. It could be something as simple as your employees gossiping about sensitive information to an outside person – which is why it’s important to make sure all your employees are responsible enough not to engage in that sort of behavior.

Avoid Duplication of Transactions

Do you ever wonder why you have to pay your bills multiple times for the same service? Different people are doing the same job but not communicating with each other. That’s a terrible way to run a business, and it can cost you money. Segregation of duties seeks to prevent that.

Avoid Unauthorized Payment

Employees responsible for handling your money should not be the only people making transactions but the only people approving them. This is to help prevent them from misappropriating funds or making unauthorized transactions.

Final Thoughts

Segregation of Duties is an important concept for businesses to understand and implement to help prevent fraud, reduce liability, and maintain internal controls. By ensuring that specific duties are divided among multiple employees, business owners can create a system where no one person has complete control over tasks – reducing the chance of any fraudulent or corrupt activities.

The SoD concept is simple: no one person can completely control a function within your company. If somebody tries to commit fraud or make unauthorized transactions, it will be obvious immediately because different people are involved in the process. That’s what makes this concept so powerful and effective in preventing fraud and increasing accountability in your business.


Help Keep Big Easy Magazine Alive

Hey guys!

Covid-19 is challenging the way we conduct business. As small businesses suffer economic losses, they aren’t able to spend money advertising.

Please donate today to help us sustain local independent journalism and allow us to continue to offer subscription-free coverage of progressive issues.

Thank you,
Scott Ploof
Big Easy Magazine

Share this Article

Leave a Reply

Your email address will not be published. Required fields are marked *