Do you regularly monitor your company's cash accounts? You
should. Even if you leave the job to your bookkeeper or accountant, you should
stay aware of where the cash is going and how the spending is approved. Along
with inventory "shrinkage," theft or improper expenditures of cash
are among the chief sources of loss for small companies.
Periodically, you hear about a huge loss caused by an
employee who's been quietly embezzling cash for years. But many smaller cases
are never noticed. And it's not always employees at fault. In fact, the vast
majority of employees are scrupulously honest and loyal. Outsiders can be
stealing your cash too, by submitting false or inflated invoices that are paid
without proper review.
What can you do to reduce the risk of losses? The textbook
answer is "internal controls." This refers to things such as standard
procedures for approving and paying bills. It includes segregation of duties -
having more than one person involved in preparing, signing, and reconciling
checks. Unfortunately many small companies don't implement proper controls -
either because there's not enough staff or because they think it's too much
trouble.
Regardless of the size of your business, here are some steps
you can take:
* Maintain a strict rule that all invoices must have an
approval signature before being paid. Nothing focuses a person's mind like
having to sign his or her name on something.
* Have a policy that all employee expense reports must be
signed off by a higher-level employee.
* Make it a rule that the person who prepares a company
check can't sign that check
* Ask your bookkeeper or accountant to give you a signed
note each month affirming that the bank statement has been reviewed and
balanced.
* Check personally to make sure that these procedures are
being followed.
* On occasion, ask to see the bank statement and canceled
checks for the prior month. Review them in detail. Not only will this increase
your chances of spotting fraud, but it will also remind you just what the
company's cash is being spent on.
Please contact our office at (518) 798-3330 for details or for assistance in
improving controls over your company's cash.
