In part 1, we talked a little about how you can prevent bookkeeping fraud. Here are some other tips to keep a watchful eye on this critical part of your business.
Implement an Expense and Reimbursement Policy. Have all credit cards billed directly to your employees rather than to your company. Have expense reports for each employee to turn in with their original receipts. An expense policy should set a daily limit to control the amount of cash being spent. This policy lets everyone know which expenses are eligible for reimbursement. Your employees are subject to greater accountability for spending when they become responsible for writing the cheques themselves to pay their credit card balance.
Review Accounts Receivable Reports and Be Sure Customer Records Are Complete. Customer collections are critical to verifying that sales are recorded. If collection calls are not made and the customer records are incomplete, there is no verification that the sale really occurred. Similarly, monitor the person who’s in charge of collecting bad debt. Implement checks and balances to ensure that debt that was previously written off was not collected later on behalf of the company and never recorded.
Have a Petty Cash Account. Petty cash can be set up as a bank type account in the Chart of Accounts. Expenses then are properly tracked and recorded, and transfers between the bank account to petty cash can then be monitored.
Calculate Sales Commissions on Cash Received. To help ensure that sales numbers are accurate and not inflated commissions can be based on cash collected on sales rather than accounts receivable related to sales.  As an added benefit, this approach incentivizes the sales staff to help with collecting those receivables.
Don’t Share Passwords. Many people share passwords, especially when separate user accounts aren’t set for each staff person or the IT specialist has to access the user account to make changes,thereby losing control of permission security and audit trails of who has made which changes.Try your best to prohibit your staff from sharing their password, keeping it on a visible post it note, or giving it out in any other way. I would recommend that you or someone in senior management control the Administrator password to make changes.
Use Online Banking to Match Expenses and Deposits.
If your software has an online banking feature, you can download transactions daily to keep on top of what has cleared the bank.
The person cutting checks or making deposits should not be the person with access to the online banking feature. Other related duties can also be divided up among employees, so that one staff member enters vendor bills and another staff person uploads the bills through online banking for payment.
Most of these tips are common sense. Don’t wait until you are a victim before implementing some or all of them. And finally, it is just good business sense to make sure your bookkeeper and your accountant work with different firms. This will give you, as the business owner, one final check and balance of your financial records. Like many people, business owners work hard for their money. Make sure you take the steps necessary to minimize the chances of being victimized by fraud or theft.
What procedures do you have in place to help prevent bookkeeping fraud? We always appreciate and look forward to your comments.