“I don’t have time for that”
“Work ON your business, not IN your business”
“Owners should sign all checks”
“Hire good people and let them do their work”
“Delegate to win.”
You’ve heard all this and more. It’s confusing.
Here’s a checklist of what I think are the minimum duties that any business owner should perform each month. This list is a little dangerous because it’s not going to be all inclusive. Your business may require more and some of these may not apply. The point is, make your list, check it each month (twice if you’re santa claus) and make sure that you maintain a presence in your financial controls.
Open all bank statements and review for irregularities. All businesses must receive cleared checks, either pictures or actual checks and those checks need to be reviewed by the owner. Consider having the bank statements mailed to your home instead of your office.
Review (or prepare) all bank reconciliations. Pay attention to old checks and old deposits that have not cleared the bank. Pay attention to any journal entries that appear on the bank reconciliation.
Scan your cash accounts’ general ledger(s). Every accounting system will allow you to review all of the transactions in a month. Pay special attention to journal entries and adjustments. You should have few or no journal entries made to your cash accounts. If you see journal entries, make sure you understand why they were made.
Go through the mail yourself. It’s ironic that opening mail is often left to the bottom of the totem pole when in fact it tells more about your business than maybe anything else. This is a task that some of our most successful clients never give up. If you can’t do it every day, make sure you do it enough to get a feel for what’s going on.
Review accounts receivable balances each month. Specifically, review your aging report for older items. Also, review all credit memos issued during the month and review the general ledger for credit memos. Your rank and file employees should not be able to enter a credit memo into your accounting system. Also, monitor your account called Allowance for Doubtful Accounts, you want to know when and why your company has written off a bad receivable.
Sign your checks. Think really hard before giving up this task. This is your last line of defense against improper payments be it intentional or unintentional. Never use a signature stamp.
Review your payroll journals.
Compare your budget to actual. Here’s one you may not be doing. If you don’t have a budget, get one. It can be a 2 hour process. I’ll help if you like. Then, once you have the budget, you can compare actual to budget and review and investigate differences. See the title of this paper, MINIMUM Owner Participation. Don’t leave this one out.
Stay Involved, make it clear that fraud controls exist and that you are involved. Image is everything. If you promote an environment without controls, your employees will find the weaknesses. Times are tough, your employees have financial challenges.
Let’s be careful out there.
Harvey