Accountability for the Moneybag

Preface: The disciples were always learning continuously. Were they cognizant eyes!  Entrepreneurs are learning continuously, too; and accountability in the office is sometimes an easy trial to improve financial business performance.

Accountability for the Moneybag

Jake M. Dietz, CPA

A moneybag blesses your business when wisely spent for the entrepreneurs intended uses. Unfortunately, sometimes money disappears from the moneybag without the owner’s knowledge. Attempting to hire office employees with integrity minimizes the risk of fraud, but it doesn’t eliminate the risk. Even the disciples, most of whom were men of integrity, had a Judas among them. Fortunately, entrepreneurs can minimize the misuse of their resources. Businesses should separate duties, provide accountability, and oversee the use of business resources.

Segregation of Duties

As much as possible, segregate these three responsibilities:

  • Custody of assets
  • Recordkeeping for assets
  • Authorization to use assets

Segregation, or separation, of duties makes it harder for one person to misuse resources without being noticed. Unethical office employees could still collude, or work together, to commit fraud, but proper segregation of duties deters employees from misusing assets because of the risk of being caught.

Let’s consider ways that duties could be segregated for a business checking account. The person that has custody of the assets should not be able to authorize their use, so the person with the blank checks should not be able to sign the checks. If they could, then they might write and sign a check to themselves. The signor shouldn’t sign a check made out to the keeper of the blank checks without proper documentation that the check should be paid. An example of proper substantiation would be payroll records indicating how much to pay the employee. Also, the signor could not sign a check to themselves unless the person with the checks provided a check.


In an ideal situation, businesses could separate custody, recordkeeping, and authorization duties. Entrepreneurs without a large office staff, however, may not be able to fully separate these functions among employees. Even when the staff is small, entrepreneurs can still provide accountability to employees. Let’s review some ways to provide accountability.

  • If there are not enough accounting employees in the office to provide accountability, then temporarily pull an employee from another part of the company to help with certain functions. For example, suppose a company has one bookkeeper, but it also has a salesperson. When the bookkeeper opens the incoming mail and prepares the bank deposit from the checks, have the salesperson be present. The salesperson can record a listing of the checks. This arrangement allows a second employee to create a record to be compared by a third person to the bookkeeper’s record.
  • Entrepreneurs can outsource certain responsibilities, such as reconciling the bank statements, to an outside bookkeeper. That bookkeeper would not have access to the checks or the ability to sign the checks. They would reconcile the bank statement to the record of cash in the accounting software.
  • Companies can use software to track who makes changes in the accounting software. Give separate user names and passwords for everyone who can modify records in the accounting software. Encourage employees to keep their passwords confidential. If an employee is changing transactions, someone else can then track who made the changes.
  • Perform unexpected inspections occasionally. If you regularly get invoices for materials, then you may not have time to go out to the shop floor and inspect the materials every time you get a bill. You could, however, occasionally ask to see the materials that are listed on a bill. Ask at random times so that the employees do not know when to expect your inspections.

Trustworthy Oversight

In addition to your inspections, work with a trusted CPA who can inspect your accounting records. Your CPA can watch over your accounting and look for discrepancies and red flags. Some accountants looking out for clients best interest, with be on the alert for fraudulent and inaccurate activity when examining financial statements. Ask your accountant if they will do that for you. A quick review of the profit and loss statement, balance sheet, and statement of cash flows sometimes reveals problems in a company. Deeper research may be needed to pinpoint the exact nature of the problem.

If deeper research is needed, then your accountant may review bank statements, images of cancelled checks, and bank reconciliations to try to identify the problem. They also may look at your financial statements over time to look for unusual activity and trends. Accounting software often allows them to review deleted transactions.

If no one has combed your books recently looking for fraud, then contact an accountant with experience doing just that. If they find something, then the problem can be addressed before it grows larger.

An article about fraud can be disturbing, but fraud has been occurring for thousands of years. Even if there is no Judas among your employees, it is still wise to take steps to deter fraud from happening. It is far better to have accountability and no fraud than to have no accountability and fraud. If you have questions on how to provide accountability for the moneybag, call your accountant and ask for ideas.

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