Are Your Assets Safe?
You have seen it in the news: Trusted Employee Steals from Employer.
You would never hire someone you thought dishonest, but are you certain about your staff's honesty? Business owners are discovering that their company's assets are not as safe as they thought. This is especially true in small business environments where a single employee manages all finances and there are few internal control procedures in place to verify that transactions are authorized and accurate.
Without adequate "checks and balances" designed to prevent and detect misappropriation of assets and material misstatements in financial reporting, employees can be free to manipulate the accounting system to their benefit. Whether they take money from the company or their misstatements are undiscovered, the end result can greatly impact your company's management discussions, financial reports, and tax filings. Unfortunately, once your financial records have been altered, discovering problems is extremely difficult.
The best way to safeguard your company's assets is to recognize and strengthen your internal control procedures. The following measures can help:
Related duties should be assigned to different people. Certain accounting functions should be segregated from each other, such as writing/signing checks, ordering/paying/receiving materials, handling cash/recording cash, etc.
Reconcile and scrutinize your bank statements every month. A bank statement can tell you a lot about your business if you review the information in a timely manner. Have the bank statement mailed directly to the owner at an address separate from the business. Examine the checks or facsimiles for authorized signatures and endorsements, track transfers between accounts, compare payroll checks with employee records, and ask questions.
Always ask for proof before you sign a check or authorize a transaction. When you insist on reviewing original documentation, your employees become more accurate and communicate their needs more clearly. Verify the names of your vendors and your employees occasionally. Cancel documents when paid; stamp supporting documentation as "paid" after signing a check.
Lock and protect your valuables. Keep blank checks and signature stamps secured. Control the use of signature stamps. Safeguard the use of passwords to your company's computer applications and on-line banking programs. Know who is authorized to initiate and process accounting transactions. Deposit cash and checks daily. It's also important to obtain fidelity bonds and insurance for all accounting and key personnel.
Know your employees and examine behavior changes. Always verify employee references before hiring. Consider the need for conducting other background checks as appropriate, including, but not limited to, the need for credit information, motor vehicle report, and criminal searches. Many white-collar crimes go unreported and continue to be repeated. Watch for trouble signs: possible substance abuse, change in lifestyle, living beyond means, or possessiveness of work.
These internal controls can help you reveal many discrepancies, as well as recognize the excellent efforts of your staff. Our firm can help you develop and implement any of these important internal controls.
If you have questions or need help to implement any of these strategies, please do not hesitate to contact Bob Williams, Technical Manager, by email or phone at 215-675-8364. We very much appreciate the opportunity to serve you.
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