Cash is the lifeblood of business. You need it to pay your employees, yourself, and for the materials, equipment, and overhead items you need to keep the doors open.
In this second of three parts, here are more easy procedures to implement so that you protect your hard earned cash.
The person who signs the checks is not the same person who balances the checkbook. If your bookkeeper balances the checkbook, then the bookkeeper does not have check signing authority. The only caveat to this is if your bookkeeper is your husband or wife. Quite frankly, if I were a bookkeeper, I wouldn’t want the liability of signing checks. If a payroll tax deposit is not made, the IRS can penalize anyone with check signing authority in a company.
The person who opens the mail doesn’t make the bank deposits. When a check is received, the person opening the mail should immediately stamp the check with the company’s name, bank name, and bank account.
Then, if a deposit isn’t made that day and there is a robbery, the checks will be more difficult to cash. And, if you don’t put the account number on the checks, you might as well not stamp the back of the check.
It’s very easy for a trusted employee to get to know a person at the bank and set up their own account under your company name and a different account number. They will then start depositing small checks into that account. Unfortunately it’s just too easy to do this, especially when someone is well known by a bank employee. Your so-called trusted employee opens a checking account with his signature under your company name. It’s done all the time—a lot more frequently than you might imagine.
Payroll is another area to watch. If one person manages payroll and you have no checks and balances, you may be setting yourself up for a problem. In one of the companies I worked with, the owner noticed that his payroll clerk’s check seemed rather high one week.
Usually he just signed the checks without paying attention to the dollar amount on the checks. After all, he trusted his employee. But one day he happened to really look at the check and it seemed high to him. He asked for a listing of everyone’s hourly rate and he watched her change hers in the computer before she printed out the payroll list. He found that she was actually paying herself over $2.00 more per hour than the wage she was supposed to receive.
When you sign a check—especially payroll checks—look at what you are signing, and never allow a stamp of your signature to be used for payroll unless it is an absolute emergency situation. If you use a stamp of your signature, make sure it is locked up at all times.
Some companies have a policy that two people must sign checks if they are over a certain dollar amount. However, if you have a stamp of one person’s signature and the person taking the money from the company is an officer who signs the checks, then the two signatures requirement is useless. That’s why it’s important that the checkbook be balanced by someone who can’t sign checks.
I know of a company where one of three partners was paying his personal bills with company money every month, even though he knew the company was losing money. It’s imperative that all the partners take an active role in looking at what money is coming in and going out of the business. If you have an independent payroll company preparing your payroll, please review the reports to make sure that they are accurate.
Many companies set up a payroll bank account separate from the operations bank account. Usually the balance in the account stays very low until money is transferred into it to cover payroll. This way if a check is stolen or an employee scans in the signature and forges it onto a check, the payroll account is the only affected account, and the amount that can be stolen is smaller than the amounts in an operating account.
In the third segment, I’ll write about more easy things to do to protect your cash.
Published: May 14, 2013
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