Summer 11 - Top 10 Housekeeping Tips
Some people love surprises. Most business owners don’t. Surprises are especially disturbing at the end of the month, when the numbers just aren’t adding up. To avoid these kinds of “uh-oh’s” and prevent fraud, owners of manufacturing and distribution businesses must stay on top of the details.
Consider these top 10 tips:
- Sign the checks. In a perfect world, the company owner would sign all the checks. This level of control may not be realistic in larger organizations, but there are still steps you can take to monitor outgoing cash. For example, create a protocol for checks requiring two signatures.
- Open the bank statements. Have bank statements delivered to your home address or delivered to you unopened in the office. Review them for unusual transfers or balance fluctuations. Look at the check payees to see if any are unfamiliar — or, in the case of a skimming bookkeeper, too familiar! Examine electronic transfers to see if any stand out.
- Reconcile accounts promptly. Require checking account reconciliation within 10 days of bank statement arrival. Be sure your accounting staff promptly reconciles accounts receivable to sales and cash receipts, and accounts payable listings and inventory counts to the general ledger. Insist that they alert you to irregularities.
- Verify vendors. Regularly review vendor lists to ensure that the vendors actually exist and are not phantom payees. If you are no longer doing business with a vendor, confirm that the company is off the vendor list and that payments have stopped.
- Confirm sales forecasts. Periodically compare the sales team’s forecasts against reality. Inflated sales projections can cause expensive problems over time in terms of purchasing, staffing and production. Make sure you’re basing important decisions on real numbers, not inflated forecasts.
- Watch the expenses. Create strict standards for expense reimbursement and randomly monitor employees’ credit card statements and expense reports. Note any unusual expenditures and request further explanation. Do not permit personal expenses on company cards, and insist on petty cash documentation.
- Keep tabs on vacations. Insist that employees take all of their vacation time, and be wary of those who hesitate to take time off. This is especially important in the accounting and bookkeeping arena, where fraud is often caught while employees are away on vacation.
- Take inventory. Require periodic counts of inventory and valuable supplies, performed by people who typically don’t handle these items. Unusual deficits may alert you to a need for better security procedures.
- Check the premises. Speaking of security, are your alarms and video surveillance cameras working properly? They really do deter theft, and there’s no point in having them if they’re not used.
- Follow up on anything that seems unusual. It’s good for employees to know that you’re involved in and aware of the details. If you find something unusual, ask for an explanation and documentation.
While some of these steps may seem onerous, they will help create a more efficient and fraud-resistant operation. Good housekeeping is good business.
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The Manufacturing / Distribution Advisor is produced quarterly by Bober Markey Fedorovich’s Manufacturing/ Distribution Services Team. For more information, please contact our team leader, Cindy S. Johnson, CPA, at 330.255.2437 or by email.