07 Apr Why are Checks and Balances Important in your Accounting System?
When running a business instituting a system of checks and balances are necessary in order to prevent and detect fraud. Having a system of checks and balances ensures no one person has control over all parts of a financial transaction.
A system of checks and balances requires purchases, payroll, and disbursements to be authorized by a designated person. Furthermore, separate handling of receipt and deposit functions from record keeping functions should be in place.
Purchasing functions should be separate from accounts payable functions. In addition the same person who writes a check should not be the same person who signs a check. If your agency is so small that you cannot separate duties, require an independent check of work being done by a board member or an outside source.
Here at TBooks we respect the function of checks and balances. When we perform accounting services, each of our clients has an individual bookkeeper and accounting manager to review their accounts. One way we keep our checks and balances in place is by utilizing an approval process throughout your company’s accounts payable process. We receive your vendor bills and process them through your accounting software. The software will route the bills to the proper approver in your company. Once approved we will pay the bill. Using approval processes is just one way that we keep the checks and balances system in place for our clients.
Another method for preventing fraud and keeping checks and balances in place is regularly reconciling bank accounts. TBooks reconciles our clients’ bank and credit card accounts every time we work on a client’s account. In addition, TBooks keeps your bookkeeper separate from the person performing the reconciliation. Your account manager will perform the reconciliation while your bookkeeper will take care of entering your transactions.
Overall, segregating financial responsibilities will alleviate fraud from your business. When you add TBooks to the equation you are adding another important layer of protection. TBooks is here to keep a system of checks and balances in your business and help prevent fraud.