How Do You Separate Duties With a Small Staff?
Dividing accounting responsibilities is key to keeping accurate books and reducing the risk of fraud. For example, an employee who counts cash payments shouldn't also be responsible for driving the cash to the bank.
In a smaller company without a huge accounting department, separating duties is easier said than done. In fact, one of the greatest risks to small businesses is a lack of separation of key duties, which increases the likelihood of risk and exposure to bad bookkeeping practices.
Whether you have legitimate risks to rectify in your processes now or simply want to adjust your company structure to ward off any potential problems in the future, here are some ideas to help you divide responsibilities even when you don't have many employees available.
Require Periodic Vacations
Many frauds have been uncovered when the bookkeeper takes her first vacation in years or a manager is forced to take a sick day that breaks a long record of perfect attendance. In these situations, the replacements try to perform their assigned daily tasks but notice that the numbers are off. When management investigates, they find out their perfect employee always came to work to keep anyone else from discovering the fraud.
The problem is that employees who always come to work are often seen as the most valuable and trustworthy employees. This creates an opportunity for them to take advantage of their independence and lack of anyone checking their work.
Don't let any employee go months or years without taking a real vacation. A good employee deserves the break, and you need the chance to catch a bad one. In fact, consider it a red flag if an employee never misses a day of work no matter how sick or how in need of a vacation he or she might be.
Rotate Employees From Other Locations or Shifts
Many consumer-oriented businesses only have one or two employees working in a store at a given time.
When someone is alone, he may feel greater temptation to steal and less fear of getting caught.
Like with taking vacations, you want to rotate employees around. You can keep them at their preferred locations most of the time, but have them occasionally work at different stores or different shifts. That way, you can look for trends like cash receipts always going down when a particular employee is working a specific shift versus when others are working that same shift.
Send Out Accounting Tasks
You don't need to do all of your accounting in one place. Instead of having your front-line employees or managers trying to do everything, you can send out tasks.
- Employees in each store can enter sales and other raw accounting data.
- A senior manager at your largest location can take responsibility for authorizing adjustments to customer accounts.
- An accountant in a central office can reconcile your accounts and prepare your financial statements.
If you don't have multiple locations or multiple qualified employees, that's okay. Outsourced bookkeeping services can help you fill in the gaps.
Create Clear Policies and Procedures
While many people choose to work for small and growing businesses because they don't have the bureaucracy of large corporations, defining policies and procedures is important in any size business.
Remember that mistakes happen far more often than dishonesty.
If someone is given a task to perform on his own with little guidance on how to do it, he might do it in a way that greatly increases his chances of making a costly error. If you give someone a clear process to follow and explain that you want it done this way to reduce the risk of errors, he will likely do it exactly how you asked him to do it.
This is especially important for employees who have a high degree of autonomy and don't have managers always checking their work. On the other hand, even if you divide tasks and tell employees how to perform them, you to make sure it's clear that they can turn to you for assistance or guidance at any time.