How to Maintain Good Accounting Controls with QuickBooks 2011 - dummies

How to Maintain Good Accounting Controls with QuickBooks 2011

By Stephen L. Nelson

Many businesses, after they grow to a certain size, need to support multiple QuickBooks users with access to accounting information and the capability, in some cases, to create accounting transactions. Unfortunately, having multiple accounting system users creates risk for the business owner.

By having access to QuickBooks, users can either inadvertently introduce errors into the accounting system or, unfortunately, intentionally defraud a business. Here’s a list of some QuickBooks control techniques that a business owner or business manager can use to minimize unintentional errors and the opportunity for theft:

  • Regularly compare physical inventory counts with inventory accounting records. This approach 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. If the owner reconciles the bank statement, she can compare the bank’s accounting for the account with the company’s QuickBooks accounting records.

  • 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. Wherever you can segregate physical custody from accounting, a built-in error checking occurs. The person doing the accounting indirectly checks on the physical custodians’ caretaking of the asset. You can ask your CPA for help in devising ways to segregate physical custody of assets from accounting and bookkeeping duties.

  • Train employees how to use 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.

    • Messy accounting records camouflage employee theft. Training not only means more accurate accounting records, but also that you’re less likely to have an environment conducive to theft or embezzlement.

  • Manage your QuickBooks accounting system. An accounting system should be a tool that you use to better manage your business. For the system to work, you need to manage that system. You can rather easily make sure that people are doing the sorts of things they are supposed to be doing by creating some simple checklists. You can use these as starting points for constructing your own list of things that the accounting clerk or office manager must do every month or at the end of every year.

A Sample Monthly Accounting To-Do List

  • Data backed up and moved offsite

  • Bank accounts reconciled

  • All invoices, credit memos, statements out

  • Any suspense accounts cleaned up

  • Financial statements delivered

  • Exceptions reported (for example, overdue invoices, bills, purchase orders, under-stocked inventory items)

A Sample Annual Accounting To-Do List

  • Adjust trial balance

  • Burn CD with year-end numbers for permanent record

  • Consider cleaning up data files if they’re huge

  • Close year when really done