Sunday, January 23, 2011
This blog posting will mostly be of interest to partners in small firms, but possibly to solo-practitioners, as no one is immune to the problem.
Do you really know what is going on with your bookkeeping?
I am not talking about profit and loss, or about general bookkeeping procedures. I am referring to the grim reality that employee theft does sometimes occur.
How does it happen?
Most often, but not always, it is a person with signing authority that takes advantage of your trust in them. Another common method is presenting the signing partner with a stack of cheques on a busy day. Again, your trust in the person and the stress of the day can overcome the need to properly review each cheque.
What can you do to defend yourself?
First and foremost, only a partner should be signing cheques. If another person does have signing authority, there should be a set maximum. Even then, a series of small cheques can add up to a large amount over an extended period of time.
If you handwrite the cheques, review each invoice yourself. If staff print off cheques for your signature, be sure an invoice accompanies each cheque, so that you can verify the payment.
In a busy office, you can reduce your stress level by having staff separate the cheques into two streams. One stream being the urgently needed cheques, for closings, court filings, etc. The second stream, for regular suppliers/accounts payable, can be set aside for the next day, or on an “as soon as possible” basis. Urgent or not, take the time to review each cheque and invoice.
The second thing you can do to defend yourself is to have occasional independent reviews of your bookkeeping records. You may already have an accountant doing your taxes, but he/she usually only sees the final reports, not the individual entries.
A review is not the same thing as checking to make sure your books balance. Nor is it a full-on audit of your records. The purpose of the review is to look for unusual entries, discrepancies, or patterns in the entries, which, if found, could signal a more in-depth review is called for.
How you choose to do this is your decision. You can be forthright and open with staff, telling them that you have hired an outside consultant. Or, if you feel long term staff may take offence at the implication, you can have the consultant work afterhours, on weekends, or remotely.
As always, I invite your comments and suggestions for future posts. Next week – HST comes to Ontario.