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Internal Controls Tips
Bad Idea - Company credit card in hands of staff.
Business owners often issue credit cards to staff in an effort to gain convenience and promote responsibility. It is also a way to foster fraud within your company due to a lack of control - oversight and restraint. If issued, make certain monthly statements are delivered to you, receipts are turned in and account changes can only be made by you.
Checks & Balances are a good thing.
Internal controls are critical as your business grows. And simple controls are often the best controls. The most important is the appearance that you know what is going on with all aspects of the accounting system. Therefore, require that you, and only you, can open bank and credit card issuer correspondence, transfer funds and sign checks.
Employee advance v. Employee reimbursement
Regardless of the method, make certain you obtain all receipts documenting the expenditures that the employee incurred on behalf of the company. To facilitate routine and garner control, remit payment to employees for such activity once a month. And in order to avoid abuse, try at all times to pay vendors directly for company expenses.
Petty cash smetty cash.
While petty cash drawers are sometimes a necessity for certain businesses, if not warranted, then throw away the key. These boxes are the great wasteland of undocumented transactions and a bastion of petty theft. And loose controls here can lead to poor internal controls elsewhere within the accounting function.
Which to use - per diem rates or actual cost?
It depends. Control versus Documentation. Per diem rates for meal expenditures work great where the employee is likely to spend the maximum (high cost city = $46/day; all other locales = $36/day). Actual cost reimbursement is wise if employee restraint and management oversight are desired.
Wish to control costs, require purchase orders.
Not a cure-all, but a wise practice that will highlight unexpected item cost changes, glaring shipping errors and instill controls to prevent misappropriation. An appropriate party should approve all orders while all corresponding documents should be saved - purchase order, packing slip and vendor invoice. Everything must match and discrepancies duly noted.
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