This is directed to all small businesses and is not directed to any one client. Generally a small business does not have the resources of a large business to implement and monitor internal controls. We all like to think we can trust everyone on the accounting staff. However, a high percentage of small businesses have a greater exposure to misallocation of assets and embezzlement, especially when the business has a one person accounting staff. Yet there are controls that can provide significant protection against misappropriation of assets by embezzlement.
First of all, the owner or manager of the business must personally and closely supervise the accounting staff. All bank statements should be sent directly to the manager or owner of the business and should be reviewed before they are forwarded to the accounting staff. The owner or manager should periodically review accounts receivable, accounts payable, cash disbursements, cash receipts, journal entries and other accounting records.
A problem with some software is that a person can issue a check inappropriately and then change the payee in the software without a journal entry. The owner should insure that the accounting staff can’t change entries without leaving an audit trail. This can usually be controlled by the software.
Obviously the above is not written to include all procedures to protect the small business. However, we can assist clients in selecting procedures that are tailored to their needs.