As entrepreneurs, we work hard for our money, and the last thing we need is to have it disappear due to fraud, hackers, or identity theft. Some people have called 2013 the year of the hacker, which is worrisome. But you’re far more likely to experience risks with disgruntled or financially desperate employees and contractors. And small businesses have a higher risk because it’s harder to segregate financial duties. Mistakes happen, too, and when they do it can be costly to get them corrected.
Here are five ways to increase your financial controls so that you can lower your business risks when it comes to the handling of cash, checks, credit cards and other cash equivalents. Keep an open mind and as you read this list, see where you can tighten up controls in your business.
1. Checking for Checks
Do you have blank checks lying around? If so, reduce the temptation and get them locked up. You can also go a step further and you or your accountant can run a report each month (or week) of missing check numbers (Reports>Banking>Missing Checks). If any checks are unaccounted for, take action by processing Stop Payment orders at your bank.
2. Bank on It
If you are still getting your bank statement on paper, where does it get mailed? The business owner should always see the bank statement before anyone else does. Another smart control is to make sure the person that performs the reconciliation is not the same person that deposits the checks. In fact, the ability to have clients pay online (like with Intuit’s Billing Solutions or Intuit Payment Network) is a way you can minimize payments being handled by staff. Segregation of duties is essential to improve cash controls.
Today, it’s a good idea to do all your banking online, if possible, so that nothing gets mailed. In that way, you have some reduced risk over identity theft.
Some banks offer multiple-user access to your banking account, so that bookkeepers can get the information they need. Lock that user ID down as much as possible, so that the user can only get to what they need to. If they’re honest, they will appreciate the reduced level of responsibility and consider it a smart financial move.
3. PayPal Protection
If you have a PayPal account, keep the balance low by transferring funds frequently to your bank account. You can also restrict access to reduce your risk.
4. Credit Card Control
If you use credit cards in your business, you’ll want to maintain tight control over them. For each employee or contractor that needs to charge items on a credit card, here are a couple of points to consider:
- If the credit limit on the current card is sky-high, then ask the bank to lower it or set up a new card with very low credit limits just for employee use.
- Contact your credit card company and get a card in the employee’s name.
- Make sure you can access the credit card transactions online. They are immediate, and if necessary, you can closely monitor what’s going on.
- Insist on a receipt brought to you for every purchase.
- Create clear procedures, limits, and approvals before the spending occurs.
- If possible, don’t let the employee “keep” the credit card during off hours. Keep it locked up on your premises instead. Even if you have employees who travel, perhaps they just get the card for trips instead of always having it in their wallet.
5. Safeguarding Payroll
One of the biggest cash outflows for small businesses is payroll. Here, segregation of duties comes into play again. If at all possible, the person preparing the payroll should not be the one who approves it and actually runs it. Perhaps a supervisor can review hours and pay rates. Depending on the version of QuickBooks, you can control payroll/employee access.
This is also why outsourcing part or all of your payroll is helpful. For those who need job costing, I like Intuit’s Assisted Payroll because Intuit will handle the tax payments and filings. If you don’t need job costing, then Intuit’s Full Service Payroll may be good. You simply log in the hours online and Intuit handles the direct deposits, tax payments and filings. If you want to know more about the Intuit payroll options, contact our office and we’ll be happy to discuss with you and help you get the best deal.
Hopefully, you already have a lot of these ideas in place. If not, see which ideas you want to implement so that your business risks will be reduced.