If you are a small business owner, you may think your accountant or bookkeeper is responsible for all book and financial related services. While their responsibility is to handle this, it doesn’t mean you are resolved from all responsibility. As a business owner, if you don’t understand your books, how can you grow your business?
The fact is, if you don’t look at or understand your books, it puts your business at risk. You may not realize this and think if there’s money in the bank, the company is profitable. This, too, isn’t the case.
If you want to protect your business and ensure your books are properly kept, as a business owner, you should do the following tasks regularly. By doing this, you can know what is going on with your business at all times and minimize financial-related issues.
1. Verify All Bank Statements are Reconciled in the Books
Every financial institution account (including a line of credit, loan, savings, or checking) needs to be reconciled each month. Also, you should have no unreconciled transactions still in the books from previous years or periods without an explanation.
2. Look at All Credit Card and Bank Statements
Do you look at your statements regularly to see if there are any unusual charges? If you don’t take the time to look at your bank statements, this is setting your business up to become a victim of fraud. In most cases, this happens because of a staff member’s actions.
If an unscrupulous employee knows you aren’t looking, they may pay themselves, their friends, or their bills with company funds. Keeping track of your statements is the best way to prevent cases of fraud.
3. Inspect and Understand Your Balance Sheet
It’s important to verify your balances are going down each time you make a payment. Look for items posted to the “fixed assets” column that may be expensed instead. It is your job as the business owner to know what the Balance Sheet shows you and understand the information presented.
4. Look at the Owner’s Draws or Shareholder Distributions Detail Report
You need to look at what your bookkeeper is posting on your balance sheet for this, rather than the profit-and-loss statement. Just because you hire someone to handle this doesn’t mean they don’t make mistakes or willingly put in the wrong information.
5. Look at the Payroll Reports
This represents another area for fraud. Be sure the staff member you have submitting your payroll isn’t adding family members or friends as employees or paying themselves a bonus. Don’t take a chance. If these people know you aren’t looking or paying attention, then you have opened the door for costly and unpleasant issues down the road.
As a small business owner, you have a responsibility to know what is going on with your business at all times. While taking care of the books when you have hired someone to handle this task for you may seem unnecessary, it’s not. Take ownership and make sure that everything is being handled properly at all times. Also, when employees know you are checking on the financial records, they are less apt to try to steal money from the company.