Finance

Accounting Internal Control can keep your business safe

Accounting Internal Control procedures can keep your business safe from fraud and theft.

In accounting Internal Control is the process of protecting your small business assets from theft, fraud, and waste.

There is Accounting fraud, which is something you hear about on the news, something that happens in large corporations that are trying to change their financial picture to look better off than they are.

There is Accounts Payable fraud, which happens in business large and small, when someone decides to cheat their employer by paying bogus bills, then pocketing the money.

Theft could be an outside person breaking in and stealing your products or equipment, or it could be an inside job, with an employee stealing inventory, or company information, or their fellow employees social security numbers to use for identity theft.

The threats are many, but there are things you can do to safeguard your assets and your business.

When your business is small, you can oversee every aspect of the business, and exercise control that way. But as your business grows, you can’t be everywhere so you start delegating. That’s when you need accounting internal controls.

These procedures will promote efficiency, protect your business from theft, fraud and waste, and they will make sure your small business accounting data is accurate and reliable.

**state all responsibilities clearly, preferably in writing. For example, each sales clerk works out of one specific cash register.

Or you bookkeeper prepares your business checks for bill payment, but you sign the checks. Or specify someone to be responsible for inventory count.

**keep proper records. Good recordkeeping means all assets are accounted for. If you use purchase orders, your bookkeeper should never pay a bill without a purchase order unless you approve it. Keep all receipts and vendor invoices with check stubs for bill payments. Keep check stubs and other paperwork associated with customer payments you receive. Poor recordkeeping habits invite theft. This is why some experts advise to hire audit company in Singapore to help you with all of the audit and accounting aspects of your business.

**keep your assets insured. You just never know, but don’t put your business at risk. The roof may collapse in a rainstorm and soak all your inventory, or a fired employee may take something with him when he leaves.

**lock up your accounting records. Keep them in a locked office space, or at least have locking file cabinets. Also protect your computer files with a good security software system and do regular backups.

**Keep an accurate and frequent small business inventory. If employees know you never count what’s on the shelves, they may be tempted to “borrow” something. Keep track of shipments received, and product shipped out, then track actual counts. Investigate any discrepancies.

**Separate recordkeeping duties from custody duties. This accounting internal control means that the person holding the asset, for example the person who stocks your inventory or the person making your deposits, should not be the person who accounts for that asset. Following the previous example that would be the person who takes the inventory counts, or the person who reconciles the bank statement.

**Reconcile your bank statements every month. Either you do it, or your CPA. If your business is large enough, your Controller can do it. Investigate any breaks in check numbers.

**Use checks with preprinted check numbers. The same for your invoices and purchase orders. Account for each form. If a check is voided out, file it just the same as if it had been sent out to pay a bill. Good recordkeeping thwarts theft.

**Split the responsibility for related transactions. For example, don’t let one person place orders, receive the merchandise, and pay the bills (unless that’s you!). Split those actions up between employees so one can keep an eye on the other.

**Use machines that make changes difficult. Cash register systems, time clocks, and bar code scanners would be examples of these. Machines don’t lie, as the saying goes. Protect yourself.

Also, if you’re using an accounting software package like QuickBooks , limit who has access to your accounting records. For example, just you and the bookkeeper and your CPA.

**Stop accounts payable fraud by using purchase orders. Have your bookkeeper verify each bill to make sure your really got that product or those supplies before they pay the bill.

**Use security cameras at each entrance/exit. This isn’t an accounting issue, but it makes sense.

These are just a few examples. I’m sure, given some thought, you could come up with more ways to protect your business. Just remember to document everything and always try to keep some sense of checks and balances between the departments in your business.

Remember, tight accounting internal controls are a mighty deterrent to theft and fraud.

Brian
Brian
Brian Singleton a retired news editor and tech enthusiast. He shares a deep love for science and technology and wishes to connect with others through this his content.

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