In my previous career I worked as a bookkeeper for numerous and varied businesses. The one thing these companies shared in common was that if there was cash and people together, the people were stealing the cash. Call me a cynic but��well, just call me a cynic. In each of the situations I encountered there were no elaborate schemes or efforts to conceal the thefts. People just took the money because no one was paying attention or making an effort to prevent them from doing so. I have developed these simple guidelines to help you protect your cash assets without making major changes to your operations.
Cross train your employees, especially those who do your payroll. This is simple common sense. If only one employee knows how to do the payroll, how will you get it out if that person gets sick or suddenly quits? But another reason for cross training is it brings that second pair of eyes in to notice anything unusual. Employees will remain more honest if they know somebody else is looking at their work.
The corollary to this rule is to make people take vacations. Most people have heard of the devoted employee who never took a vacation for years. Turned out it was because he or she was stealing hand over fist and couldn��t take the chance that someone would step into their job and notice the discrepancies.
Always reconcile cash with receipts. Cash is an enormous temptation and employees learn fast when you don��t have a handle on how much you have. Every transaction should have a receipt and receipts should be reconciled with cash within 24 hours. Sometimes you must be creative in finding ways to do this. I worked for a municipality that ran a theater. Each performance usually sold out and the box office was always around $850. I insisted the theater manager start using numbered tickets which I would dole out before each performance; one ticket per seat. The manager would bring any unsold tickets and the cash. Since I knew exactly how many tickets were sold, I knew exactly how much cash should be there. Box office receipts immediately grew to $1,000 per performance and never dropped below that again. One of the manager��s society matron volunteers in the box office was obviously skimming receipts.
The corollary to this rule is the person who col lects the cash should never reconcile the receipts. I shouldn��t have to explain why!
Change independent auditors every three years. Even if you have an excellent and trusted auditor, give him or her a break every three years and get a different company in there. Auditors use different methods and techniques. If you use the same auditor year after year, employees will learn where they look and how they conduct the audit. That creates an opportunity to embezzle in areas the auditor isn��t checking. Bringing in a new auditor can foil such schemes. I also worked for one company where the auditor was in cahoots with the CFO! Think Enron.
Don��t give one person total oversight and authority over the cash and accounting functions. I was once brought in by management to help the CFO at a small company who was entrusted with all the accounting duties. He wouldn��t give me any real work to do and out of shear boredom I started going through the books. It turned out he was writing company checks to himself for cash or direct personal expenses. He made no attempt to hide what he was doing because management trusted him implicitly.
There should be at least two people in the accounting department who back each other up and check each other��s work. If you are a very small company and only have one person in accounting, then you must be the second pair of eyes. Make it known that you ��spot check�� invoices, take the books home to review, monitor purchase orders, approve other employee��s expense reports, and analyze expense trends.
Establish a system of checks and balances. This would have stopped the CFO who used the company credit card to pay for trips and shopping, and then wrote off the expense as interest against a company loan. Or the clerk who used petty cash for her daily lunch money, or the department manager who charged gifts for his girl friend to his office supply budget, or the double-dipping employee who recycled his expense receipts��
Beware of employees who are too territorial. I worked at a distributorship where one clerk absolutely refused to let anyone else process purchase orders for a certain vendor. Only she knew how to deal with this vendor, or so she said. It turned out she was ordering drop shipments of the vendor��s products to her home and reselling them.
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