To better prevent the opportunity, if not the temptation, of employee embezzlement, South Carolina businesses might consider adopting the following safeguards and procedures.
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Cash is to easy to misappropriate, do not tempt an employee by letting him or her handle both cash received and bank deposits. All too often business theft is committed by employees; minimizing temptation reduces the chances of this unfortunate occurrence
Unless he or she is the sole owner of the business, the person writing out the checks should not also be the one who signs them, otherwise there is no effective control over to whom checks are being made out to. As a standard internal accounting practice, you may want to develop a system that compartmentalizes who handles cash, drafts checks, and signs them.
Use only pre-numbered checks and keep all of the cancelled or voided checks in your records. This will help make it readily apparent if additional checks are written without your knowledge. Additionally, it aids in determining where money is going, from which check book it came from, and who may have drafted it.
Either you or an outside accountant should do a monthly reconciliation. You should never allow the same person who writes the checks do the reconciliation. In addition to discovering accounting discrepancies in a timely fashion, it prevents an employee who is embezzling funds from “cooking the books.”
If feasible, you should consider making it a practice to deposit your cash receipts each day. Never let cash collections for one day get mingled with the next day’s collections. This creates problems when discrepancies occur. If you choose not to make a deposit each day, put the day’s cash in a bank bag with a lock, a signed statement of the contents, and keep it in a safe place. If you accumulate several days’ worth of collections before making a deposit, keep each in a separate lock bag until you are ready to make a deposit.
Use pre-numbered sets of these documents and allow the individuals making the sales or transactions to keep duplicates. You will keep the master copy to enable you to make sure they account for all of their transactions.
You should never use cash from the day’s receipts to pay for small cash outlays. You should always use a petty cash fund and voucher system. Otherwise, you risk losing track of the day’s receipts. Put a voucher in the petty cash box every time money is taken out. When the fund is depleted, write a check and bring it up to the maximum amount, and record all vouchers at the time the check is cashed to replenish the fund.
You should always maintain a master or control account for all of your accounts receivable, and reconcile it each month to the subsidiary accounts receivable. If someone is stealing money from customer payments, it will be easier to spot if the master and subsidiary accounts are reconciled regularly.
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