This two part blog series discusses how to take steps to safeguard your business against theft and what to do if you suspect theft is occurring.
Cash is king. But what happens when cash walks right out the door through carelessness or dishonest employees? Internal controls and solid policies and procedures are necessary to protect your business assets. These assets go beyond just cash – inventory and supplies all cost a business owner money too.
Because cash is one of the most vulnerable assets to theft, internal controls should start with safeguarding cash. An effective way to protect this asset is to separate the duties of those who handle receipts and record accounts receivable. Have one person open the mail and record checks received, and another post the receipts on your books. A third person should reconcile the checking account. If you don’t have that large of a staff, a bookkeeper can be used to reconcile accounts or assume parts of this puzzle.
If you receive cash, have only one person operate the cash register and have a second person count the receipts after each shift. Start with a fresh cash drawer with a set amount of cash per shift. The more you separate these duties, the higher your chances of one employee detecting errors or improprieties made by another.
If your staff is so small that you cannot separate some of these tasks, sign all checks yourself and make sure you receive the bank statement each month before it is opened. Review the check copies returned with your bank statement to assure they weren’t altered or forged. Insist that bank statements are reconciled to your books immediately and any discrepancies are followed up on. If you don’t have time, outsource these duties.
Petty cash can be an easy way to lose small amounts of cash over an extended period of time. If petty cash replenishments occur often, check for missing receipts and perform an unannounced audit on a periodic basis.
And remember, the very best internal control is hiring people with integrity. Know your employees. Perform thorough background checks on all new hires, including credit checks for anyone who will be handling cash.
Consider asking your accountant to perform an internal control review of your business and make recommendations for improving safeguards.
Part II of this blog will identify signs that theft may be occurring in your business.