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How much do you know about your business?

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Even if you use an outsourcing company like SG Partners, you still have to understand and monitor your business.

Do you ever verify your 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 has been quietly embezzling cash for years. However, smaller cases are less noticeable and it is not always the employees at fault. In fact, the vast majority of employees are scrupulously honest and loyal.  Outsiders can be stealing your cash by submitting false or inflated invoices that are paid without proper review.

Do you really need to pay for an employees hair cut on a business trip?  Expenses like personal hygiene are not a companies responsibility unless an agreement of such has been reached prior to the trip.

How to reduce risk of loss

What can you do to reduce the risk of losses?  The textbook answer is “internal controls.”  This refers to things such as standard procedures for approving and paying bills.  It 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 is not enough staff or because they think its too much trouble.

Regardless of the size of your business, there are some steps you can take:

  • Maintain a strict rule that all invoices must have an approval signature before being paid.  Nothing focuses a person’s mind like having to sign his or her name on something.
  • Have a policy that all employee expense reports much be signed off by a higher-level employee.
  • Make it a rule that the person who prepares a company check can’t sign that check.
  • Ask your bookkeeper or accountant to give a signed note each month affirming that the bank statement has been reviewed and balanced.
  • Follow up personally to make sure that these procedures are being followed.
  • Every few months, ask to see the bank statement and canceled checks for the prior month.  Review them in detail.  Not only will this increase your chances of spotting fraud, but it will also remind you just what the company’s cash is being spent on. Remember you do have a say in what your company spends its money on.

Please contact SG Partners for details or for assistance in improving controls over your company’s cash.