Out of Control Cash

Out of Control Cash, by Doris Cahill, President of DMC Accounting + Technology

This is no excuse for being complacent, though, since doing so could leave your firm open to big financial losses. Losses may include fraud in its various forms, as well as unauthorized or non-business related charges on checks and credit cards. Carelessness and write-offs of variances on bank statements will ultimately impact your bottom line.

Other steps that should be taken to reduce the chances of fraud include locking up your check stock, accounting for all cancelled and voided checks, and printing all checks in sequential order. Unless you take such precautions, anyone with access to the accounting area could grab a few spare checks from the middle of the stack. And if the bank reconciliation falls behind it could be months before a fraudulently cashed check is discovered!

Also keep in mind that corporate credit card accounts are subject to the same problems as your checking account. Credit card statements should be carefully reviewed and reconciled monthly. Caution should be used when giving out credit card numbers and credit card statements should not be left lying around for all to see.

To sum up, here are some basic tips for keeping track of your cash and preventing fraud:

• Use one operating account per corporate entity, two if you feel that you need a separate payroll checkbook.
• A good monthly bank reconciliation looks for checks out of sequence. Lock up your check stock. Do not be careless with your account numbers.
• Sloppy bank reconciliations are problematic. Do not simply write off cash variances each month. Cash needs to tie out to the penny. If your bookkeeper is continually adjusting for variances, they are either not qualified or there is a bigger problem.
• Negative cash on your balance sheet is not possible; it means that your account is overdrawn and that checks are either being stuck in a drawer somewhere instead of being mailed, or that payments to vendors are about to bounce.
• Insist on hard copy or back up for checks that are written. There should be a logical, consistent filing of paid bills.
• If you give out authority to sign checks to your accounting staff, review your cancelled checks periodically. Open the bank statement and look at what has cleared on the statement.
• Require dual signatures for checks over a fixed dollar amount.
• When purchasing new check stock, be sure that is watermarked for security. Check-writing software makes it easy to replicate company checks.
• Make sure your printer for processing checks is a laser printer, Ink-jet printers use water-based ink that can be easily altered.
• Reconcile credit card statements monthly. Again, do not be careless with your account numbers.
• Support your accounting staff. They are very important to your firm. Provide them with the tools and support they need to do their job.
• All accounting staff should periodically take vacations. It is more difficult for an employee that is perpetrating fraud to keep it covered up if they are away from the office.
• Even in the smallest of firms, there needs to be a separation of duties. If possible, separate data entry, check writing, and bank reconciliation duties.
• Close out and change account numbers at the first sign of fraud. Do not be lulled into thinking it is a "onetime thing."
• Many local colleges offer a certificate program in accounting. Seek out people with these certifications when hiring and encourage existing accounting staff to pursue such degrees.

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