Published: May 11, 2008 12:55 am            

Keep an eye on your company’s cash

Do you regularly monitor your company’s cash accounts? You should. Even if you leave the job to your bookkeeper or accountant, you should stay aware of where the cash is going and how the spending is approved. Along with inventory “shrinkage,” theft or improper expenditures of cash are among the chief sources of loss for small companies.

Periodically, you hear about a huge loss caused by an employee who’s been quietly embezzling cash for years. But many smaller cases are never noticed. And it’s not always employees at fault. In fact, the vast majority of employees are scrupulously honest and loyal. Outsiders can be stealing your cash too, by submitting false or inflated invoices that are paid without proper review.

What can you do to reduce the risk of losses? The textbook answer is “internal controls.” This includes having standard procedures for approving and paying bills. It also includes segregation of duties – having more than one person involved in preparing, signing, and reconciling checks. Unfortunately many small companies don’t implement proper controls — either because there’s not enough staff or because they think it’s too much trouble.

Regardless of the size of your business, here are some procedures that will help provide cash control.

• Require that all invoices have an approval signature before being paid. Make it a rule that the person who prepares a company check can’t sign that check.

• Have a policy that all employee expense reports must be signed off by a higher-level employee.

• Every few months, review the bank statement and canceled checks for the prior month. This increases your chances of spotting fraud and reminds you how the company’s cash is being spent.



David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.

        

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