Are you an absentee owner of a business, an owner not directly involved in the “books” of the business, a board member of a small volunteer agency, a church, or a small government agency?
One easy method to improve internal controls is to have the bank statements of the entity mailed to someone, like an owner or a board member, other than the person responsible for writing and/or processing the entity’s checks and maintaining the entity’s books.
When bank statements are mailed to an owner or a board member, this allows someone else to review the activity and printouts of the cancelled checks of the entity. This may alert him or her to inappropriate or unapproved expenditures and the possibility of bills going unpaid. By incorporating this internal control procedure, it also makes the bookkeeper aware that someone is checking the bank statements and activity of the entity, and will less likely use this as an avenue to commit fraud.
Also, reviewing monthly financial statements and the check registers by an owner or board member can be another important internal control procedure.
Since improper expenditures are the most common area for fraud in small businesses, these steps may help prevent fraud from occurring or at least can help determine if fraud has already occurred.
If you have any questions or concerns about your business or non-profit entity, please contact our office to meet with a professional and discuss your specific situation. Request a complimentary accounting consultation or contact us at (616) 642-9467.
At BHT&D CPAs, we are committed to giving each client personal attention and spending the time needed to completely understand your circumstances.