Top 3 Problem Signs in your Accounting Process

Investigative Accounting - Undercover FBI Agent

I remember in undergraduate school being recruited as an accounting student for the FBI (Federal Bureau of Investigation). Now before you become too impressed with my credentials, I wasn't the only one, they were actually speaking to the entire class. I did not pursue the opportunity because, at the time, I did not see how a "bean counter" could actually help in crime solving.

Since my recruiting "brush with the law", I have seen first hand how businesses can be exposed to theft and criminal activities and how many times company owners are unaware of what is happening. An example of this was a real estate management company with several properties and with individual checking accounts for each property. The owners were unaware that their weekend janitorial service had been stealing blank checks from some of their property accounts and had been writing the checks for several thousand dollars.

Once we began reconciling the accounts to the bank statements at the end of the month, we discovered that the crime had been committed and immediately reported it to the unsuspecting business owner. I can't imagine how long this could have gone on if we had not had the proper accounting procedures in place.

Here are some potential problem signs to look for in your accounting processing:


Untimely bank reconciliations

Reconciling should be a top priority for your accountant. If proper systems are in place, a bank reconciliation should be accomplished within a day or two of receiving the bank statement.


Untimely financial statements

For most small to medium size companies a draft financial statement should be available by the 15th of the month following the reporting month end. Operating account balances should be available to the owner at all times.


Limited checks and balances

As your company grows, it is important that you separate employees duties. This could look like having one person approve invoices and the second sign checks and maybe a third reconcile the bank statements. It is important to build in procedures that lessen the likelihood of theft and to help lessen your employees fiduciary exposure.

Reduce your financial exposure by applying proper accounting procedures. Ensure your accounting processing discourages unlawful activity.