Maintaining Good Accounting Controls in QuickBooks 2012

When you introduce multiple accounting system users into your QuickBooks 2012 you increase the need for accounting controls. By having access to the accounting system, users can either inadvertently introduce errors into the accounting system, or, unfortunately, some users may intentionally defraud a business.

For these reasons, some of QuickBooks accounting control techniques to minimize unintentional errors and minimize the opportunity for theft:

  • Regularly compare physical inventory counts with inventory accounting records. Inventory, unfortunately, shrinks. People — sometimes employees, but often pseudo-customers such as shoplifters — will steal inventory.

    Therefore, one of the things that you need to do both to minimize your inventory losses and to maintain accurate accounting records is to regularly compare physical counts of your inventory with what your accounting records show.

    A small convenience store, for example, may want to compare tobacco inventory on a daily basis, beer and wine inventory on a weekly basis, and all other grocery inventory items on a monthly or annual basis. This approach to frequently counting the most valuable and easiest-to-steal items accomplishes two things:

    • Inventory shrinkage is quickly identified.

    • The business owner can minimize inventory shrinkage by identifying the type of inventory that is most often stolen or even when inventory is most often stolen.

  • Reconcile bank accounts. One thing that business owners should do is reconcile their own bank accounts. Often, employee theft by accounting personnel occurs as employees figure out how to write checks on the company’s bank account that the owner doesn’t see. One sure way to find a fictitious and fraudulent transaction is to have the owner reconcile the bank statement.

    If the owner reconciles the bank statement, she can compare the bank’s accounting for the account with the company’s QuickBooks accounting records. Any obvious discrepancies can be fixed — which means that the QuickBooks accounting records are more accurate. Additionally, any flaky, suspicious transactions tend to become obvious when the business owner looks closely at checks.

  • Segregate accounting from physical custody where possible. In a small business, it’s difficult to always separate the accounting for some activity from the physical custody or physical responsibility for that activity. For example, it’s tough to segregate the inventory accounting from physical custody or access to that inventory.

    A store clerk, for example, may easily be able to steal cigarettes and also adjust inventory records through cash register sales for cigarettes. Nevertheless, wherever you can segregate physical custody from accounting, a built-in error checking occurs.

    You can ask your CPA for help in devising ways to segregate physical custody of assets from accounting and bookkeeping duties. And you really, really should do this. Unfortunately, employee theft is very common.

  • Train employees in the use of QuickBooks. You should train employees to use QuickBooks if you have a business of any size for two basic reasons:

    • Someone who knows how to use QuickBooks is less likely to make inadvertent errors. So,, if you can, it makes good sense to provide some employees with help or training or both. Those resources let people more comfortably and more accurately use QuickBooks features to build financial information that lets you better manage your business.

    • Messy accounting records camouflage employee theft. Often, one of the things you see when employee theft happens is really messed-up accounting records. So training not only means more accurate accounting records but also that you’re less likely to have an environment conducive to theft or embezzlement.

  • Close your QuickBooks file. If you take a Principles of Accounting course, you’ll learn that closing means a set of bookkeeping procedures somebody goes through to zero out revenue and expense accounts.

    In QuickBooks, closing means something different. But you still want to close the QuickBooks file in order to maintain the integrity of your data. Here's how: Choose the Edit→Preferences command, select Accounting and then the Company Preferences tab, and then click the Closing Date Set Date/Password button. When QuickBooks prompts you, specify a "closing date" and password.

    After you provide this information, QuickBooks either prohibits users or limits users from changing or entering transactions dated before the closing date. (Only people with the password can make changes to or enter transactions with dates earlier than the closing date.)

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