Protect Your Cash Part 1 By Ruth King

Cash is the lifeblood of business. You need it to pay your employees, yourself, and for the materials, equipment and overhead items you need to keep the doors open.

Obviously, for your business to survive you must generate cash. However, even if you are showing a profit you may not have cash. This is the case when you do work, bill for your work, and don’t collect your money.

There is no sense in doing the work if you’re not collecting the cash for the work you do. That, from a business standpoint, is one of the most important things to do. But, once you get the cash in the door, you must make sure you protect that cash from employee theft and other mismanagement. And, there are some simple and very easy things that you should do to make sure that you protect your hard earned cash.

There are many ways that you give employees the opportunity to take cash.

I’ve seen too many “loyal bookkeepers” that have been stealing a few dollars here and there for the past fifteen or twenty years. Over the long term, this really adds up to a lot of dollars…dollars that you have earned but are gone simply because you did not take the steps necessary to protect your cash. And you are shocked and hurt when the theft gets discovered. A very wise person once told me, the job of the good embezzler is to become the trusted bookkeeper.

Many of you wonder, how could I not know if someone is stealing? The answer is really very simple. You are so busy running the day-to-day operational issues, sending out bills, collecting the money, and not looking at the bank deposits. You don’t devote any attention to the cash management side of the company except for watching accounts receivable and accounts payable.

And…you trust the people working for you. The theft may be small, $10.00 or maybe even $100.00 so that you might not notice it at all. But, over the long term it really adds up.

Here are things that you can do, many of them very easy to put the checks and balances in place so the hard earned cash that comes in the door, stays in the door until you are ready to release it to run your business or add it to your profit.

First, send your bank statements home. This is the first line of defense. When you open the bank statement first, you see the checks, the names on the checks, and the signatures on the checks. You’ll know a lot and can ask questions. By sending the bank statements home, you’ll also find out who has bounced checks, loan payments that were late, etc.

No one can forge your name and remove the checks during the reconciliation of the bank statements. If you ask for the bank statements, the forged checks won’t be there…and you probably won’t think about it since most of the time you don’t get all of the checks back.

The person who signs the checks is not the same person who balances the checkbook. And, as the owner of the company, you must balance the checkbook every month. If your business is a partnership, each partner should take turns balancing the checkbook. This way everyone has a better idea of what is going on with respect to the checks.

The person who opens the mail doesn’t make the bank deposits.

When a check is received, the person opening the mail should immediately stamp the check with the company’s name, bank name, and bank account.

Then, if a deposit isn’t made that day and there is a robbery, the checks will be more difficult to cash. And, if you don’t put the account number on the checks…you might as well not stamp the back of the check.

It’s very easy for a trusted employee to get to know a person at the bank and set up their own account under your company name and a different account number. They will then start depositing small checks into that account. Unfortunately it’s just too easy to do this…especially when someone is well known by a bank employee. Your so-called trusted employee opens a checking account with his signature under your company name. It’s done all the time…a lot more frequently than you might imagine.

Payroll is another area to watch. If one person manages payroll and you have no checks and balances you may be setting yourself up for a problem. In one of the companies I worked with, the owner noticed that his payroll clerk’s check seemed rather high one week.

Usually he just signed the checks without paying attention to the dollar amount of the checks. After all, he trusted his employee. But, one day he happened to really look at the check and it seemed high to him. He asked for a listing of everyone’s hourly rate and he watched her change hers in the computer before she printed out the payroll list. He found that she was actually paying herself over $2.00 more per hour than the wage she was supposed to receive.

When you sign a check…especially payroll checks…look at what you are signing, and never allow a stamp of your signature to be used for payroll unless it is an absolute emergency situation. If you use a stamp of your signature, make sure it is locked up at all times.

Some companies have a policy that two people must sign checks if they are over a certain dollar amount. However, if you have a stamp of one person’s signature and the person taking the money from the company is an officer who signs the checks, then the two signatures requirement is useless. That’s why it’s important that the checkbook be balanced by someone who can’t sign checks.

Next week, I’ll tell you more how to protect your finances.

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