Keeping the Bookkeeper Honest

The Bookkeeper is one of the most important positions you have in your food and beverage establishment. She counts cash receipts, settles credit card transactions, cuts accounts payable checks, does the payroll (a discussion for another time), makes up the deposit, takes it to the bank, handles and reconciles the petty cash fund, balances point of sale terminals, records sales transactions, and reconciles both bank accounts. What a workhorse! What would you do without her!

If the above scenario resembles your bookkeeper, you may be setting yourself up for grand theft! While we tend to trust our employees, giving them the opportunity to steal sometimes leads to exactly that. When you read about embezzlement, it is often the person everyone least expected.

While it may be difficult for a small operation to have proper segregation of duties, there are a few things the owner can do to protect himself.

The owner should count the previous day’s cash receipts, make up the deposit, and take it to the bank. He should list the cash received from each point of sale so the Bookkeeper can balance cash to sales. Since the Bookkeeper is recording sales, she should only receive a copy of the deposit slip and the cash listing as backup for recording cash in the General Ledger.

The Bookkeeper should not have access to the Petty Cash fund. She records petty cash activity and thus should not handle cash. The owner should control the petty cash fund and handle all petty cash transactions. At month end, the owner should count the petty cash fund, complete a count sheet, and give the count sheet to the Bookkeeper to reconcile to the General Ledger.

One common fraud is where the Bookkeeper establishes herself or a company she controls as a vendor in the Accounts Payable system. To establish control over checks cut, the owner should review the checks and sign them. If he does not recognize a particular vendor, he should ask the Bookkeeper for a copy of the invoice. If the invoice does not appear to be for a product or service he recognizes, the owner should phone the company and ask for an explanation.

While proper segregation of duties requires that the bank account be reconciled by someone other than the Bookkeeper, this may be impossible for a small operation. Where the Bookkeeper reconciles the bank account, the owner should review the bank reconciliation. He should agree the Balance per Books to the General Ledger and scan through the General Ledger cash activity for unusual journal entries. He should agree the Balance per Bank to the Bank Statement balance. The owner should ask the Bookkeeper to explain any old reconciling items and other unusual activity. When satisfied that the bank reconciliation is in order, he should initial it so that at a later date, he can see he reviewed it.

The Bookkeeper is an important part of your management team. Make sure she is working for you, not against you.

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