Internal Accounting Control

Internal Accounting Control is often overlooked in the rush of day to day business but it can go a long way toward protecting your assets. Below are a few internal accounting control ideas that you might find useful. How many of them are you currently using in your business?

1.       The sales system should incorporate segregation of duties. One person should receive the mail, open it, restrictively endorse the checks and prepare the deposit slip. A second person should enter the payments into the accounting system.

2.       A member of management should approve and initial all bills before payment. Additionally, checks should be matched to the approved bills before signature.

3.       In order to quickly identify mistakes, the books should be closed within a few weeks of month-end. Additionally, a member of management should perform the following every month:

a.       Verify that the payroll ledger includes only legitimate employees and that their wages are correct

b.      Review the general ledger to determine that accounting entries are properly classified

c.       Review the financial statements to track your company's progress

4.       All employees should have background checks. Additionally, employees with access to the accounting records should also have a credit check.

5.       Be careful about hiring individuals who have friends and family members already working for your company. They are more likely to collude against their employer since, as the saying goes, "blood is thicker than water."

We hope that you find these ideas useful. If you have any questions or would like further information regarding Internal Accounting Control, please call me at 818.379.9800.