Internal controls are systematic measures for conducting business in an orderly manner, safeguarding assets, deterring fraud, and supporting the collection of complete and accurate of accounting data. Internal controls separate the duties in standard business workflows. This presents a challenge to most small businesses.
Who signs the checks? One can argue that this isn’t a problem, because banks have copies of the signatures of trustees and managers. Then life happens.
An observant office manager duplicates the owner’s signature "in an emergency."
The owner "signs" payroll checks on a second pass through the printer using a "signature page."
An owner signs a blank check(s), and then leaves them with a bookkeeper or office manager "for emergencies."
Such a work-around gives the flexibility to meet the needs of an active business. They also present vulnerability.
There are two simple controls that discourage mischief. First, use pre-numbered checks and lock them up. Some owners like to use checks without numbers, because the computer will print the number on the check. This requires remembering the number of the last check they printed. Reconciling these bank accounts can be an adventure.
I strongly encourage business owners pay the fee to see copies of checks with their bank statements and to open the statements themselves. This 15-minute exercise gives the owner another way to see what is really happening. Sometimes, the news isn’t good.
Sharon McNeal, a small business owner, helps small businesses keep their doors open. Sharon ‘s “Small Business Survivor” distance seminars provide guidance on planning/growing a business, and show how to run it better and understand your finances. These seminars explore the business issues behind newsletter case studies. For details, visit www.Biz4theRestofUs.com or send request for a new topic to smcneal@Biz4theRestofUs.com.