“Quicklet” - A Podcast for QuickBooks Pro, Premier, Enterprise Solutions, Point of Sale and Peachtree users featuring helpful information, tips, tricks and suggestions for bookkeepers, business owners, and consultants.
Today I want to remind everyone of the importance of Internal Bookkeeping Controls. So often we business owners are very busy running our businesses and we forget the value of the oversight when it comes to our books.
QuickBooks and other programs like it have made our bookkeeping chores so easy, however, the responsibility for review, audit, and systems remain and to a great degree are even more important.
I recently read an article in the Northern Nevada Business Weekly, a great little business weekly in my home town of Reno, NV about a business whose bookkeeper embezzled $435,000.00 from them.
This story is a heartbreaking reminder of the importance of controls, systems, and oversight.
This bookkeeper was able to succeed because she had total control. She was able to write checks to herself, void/delete transactions, pay bills and authorize credit card transactions and no one was "looking over her shoulder" to keep her honest.
According to the article, the business owners verified her credentials before she was hired, but things changed over the next three years. This is also a good reminder that sometimes too much trust or autonomy invites dishonesty.
Here are some tips that I use in my business and suggest to my clients:
1 - Never make your employee the Administrator of your QuickBooks File
You can give them administrator rights, however only you should be the administrator.
2 - Never share your Administrator password with your employees
3 - Do not make your Administrator Password anything your employees can guess
Don't use your pet's name, child's name or birthday, favorite sports team, etc. Employees will get to know you and your hobbies, passions, families...don't give them clues to your password. (golf, corvette, spike, 052695 - all very easy to figure out).
4 - Change your Master Password at least every 90 days
5 - Create another Administrator Profile for yourself with a different password & user name
If you have to log on in the presence of your employee, you should use the alternative profile, then delete it or create a new name/password later. Also, if you have an alternative profile and someone gets the password, it won't be the master administrator log on.
6 - Split responsibilities & tasks
Don't let one person do everything; make sure that the person who posts bills and prints checks is not the person who signs and mails the checks. Also, make sure that who ever is signing the checks gets a copy of all the invoices or bills paid with a check when he/she is given the check to sign.
7 - Make sure all VOIDED checks come to you!
I recently did some work for a client whose bookkeeper voided a check to herself in November 2006, then replaced it with a check issued in December. When I reconciled the bank account I found that the original check cleared in January! The check was voided in QuickBooks, but the bookkeeper kept the check and cashed it a couple months later!
8 - Open an account with a bank that provides check copies with your statement
In the example of the voided/cashed check in number 7, I was able to confirm that bookkeeper had not physically destroyed or voided the check and that she had, indeed, paid herself twice when I showed the client the check copies from the bank statements.
9 - Learn how to do the BANK RECONCILIATION YOURSELF! Do this as soon as your bank statement is available!
Demonstrate to your staff that you will audit and control your books. If you can't, don't have the time, or just don't want to do this, hire an outside party to reconcile your bank accounts IN QUICKBOOKS on a monthly basis.
It's important to do the reconciliation in the program so they can see the activity, become familiar with what's normal or unusual, and show your accounting staff that they are being audited every 30 days. Remember, this is not punitive or born from fear - this is a good management procedure and should be presented as a positive addition to your monthly business routine.
If your business has a high volume of checks & deposits, consider asking your bank to send you statements twice a month; on the 15th and the end of the month. I have a client for whom I have been keeping the books for 21 years. His volume is very high so we instituted this policy about 18 years ago. It's great! I reconcile in no time and if anything is "off" we catch it very quickly!
My tried & true tip...open a separate bank account for Payroll and one for Credit Card Processing. You can move funds into the Payroll account before checks are issued.
I keep a separate account for Credit Card processing. Reconciling your bank account can get a little complex when you have a variety of bank card deposits, discounts, and fees interspersed in the main account's statement. I prefer to have credit card payments deposited into a separate account.
Then I just go online to my bank and transfer available funds to the operating account about twice a week. I always transfer even amounts ($1000, $5000, $6200 for example) so that when I reconcile, it is evident where the funds came from...transfer, not income. I prefer to control my funds and don't want to put everything in my main account at risk when an outside processor accesses my account....remember...if they can put it in, they can take it out!
I have a separate account and use a different color and number sequence of checks for payroll and I never have a balance over $500.00 in excess of the amount necessary for payroll & the associated taxes. I do this for several reasons:
A - Employees do not have access to the company's main operating account number or information.
B - Potentially dishonest employees and especially the bookkeeper don't have access to an account with a large balance. Forged or altered checks will not put significant funds at risk.
C - If you use this account to pay your payroll taxes electronically, the risk that an error is made and the outside processor cannot access your primary account's funds.
10 - Never let your employees access your online banking or make online transfers.
Some banks now allow you to transfer from your account to another customer's account...don't let that other customer be your bookkeeper! This is awful!
The most important thing to remember is that you are in charge...you sign the front of the check, so you can and must create policies that assure security and prevent loss. Split duties, don't let anyone have total control, and very importantly, don't let anyone "bully" you out of your books!
I hope this is helpful and that you will tune in next time for more tips about QuickBooks and bookkeeping.
Make sure you are updating your QuickBooks software regularly! Intuit is always working to improve their software and the updates they make available for download make your life easier! You can go to the Help menu inside your program to get updates.
Well, that’s it for now. Please tune in again for another in our Quicklet© series. If there are topics you would like me to cover send me an email at email@example.com.
I welcome your ideas, questions and comments.
Got a QuickBooks Mess? Call The QuickBooks Gal!
I’m Jayne Miller, The QuickBooks Gal. Thanks for listening.
Reno - Tahoe - Sacramento 775-348-9200 916-216-4949
Jayne Miller, owner & Senior Consultant
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Custom Business Solutions ©2006, 2007, 2007, all rights reserved