Accounting Procedures & Internal Controls
At TAG, we provide outsourced accounting services for small to medium-size, mostly private companies. With outsourced accounting, it allows for companies to select the level of accounting help they need, without the burden of hiring additional in-house accounting staff.
In addition to providing accurate and timely financial information, TAG offers accounting help to strengthen companies’ accounting departments by setting up proven processes and policies for internal control and accounting procedures. With internal controls put in place, businesses can make fully informed financial decisions, while preventing fraud and inaccuracy.
Accounting Procedures: Accounting procedures dictate how companies record and report their financial information. Generally accepted accounting principles (GAAP) is the leading U.S. authority for accounting standards in the private industry.
Internal Control: Defined in accounting and auditing as a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.
Considerations for Creating Accounting Internal Controls:
Separation of Duties: Split responsibilities for bookkeeping, deposits, reporting and auditing and this creates less of a chance for a single employee committing fraudulent acts.
Control Access: Make sure you set up your accounting system with strong passwords, lockouts and access logs in order to keep unauthorized users out and also provide a way to audit usage.
Physical Audits: By physically counting cash by hand and tracking in the accounting system, it can reveal any hidden discrepancies in account balances. This can be done monthly, quarterly or annually for larger projects.
Documentation: Maintain consistency in record keeping by standardizing documents used for financial transactions, including invoices, receipts, and expense reports. A lack in standardized documents can cause items to be overlooked or misinterpreted in a review.
Trial Balances: A good way to ensure that books are balanced is to use a double-entry accounting system. You can also discover any discrepancies by calculating daily or weekly trial balances.
Reconciliations: Account reconciliations ensure that balances in the accounting system match with account balances for the bank, credit cards or supplier accounts. A bank reconciliation compares the cash balances and records of deposit and receipts between the accounting system and bank statements.
Approval Authority: Add a layer of security to certain types of transactions by requiring specific managers to authorize, analyze or approve. Requiring approval authority for large payments and expenses can prevent employees from making fraudulent transactions.
TAG helps to establish internal controls & accounting procedures over key areas of:
- Cash Management
- Accounts Receivable
- Accounts Payable
When setting up a new outsourced accounting client, TAG performs an internal control walk-through, making sure that accounting procedures are in place to help eliminate fraud and provide accurate financial information.
Questions to Consider:
- Who’s signing the checks?
- Who has access to the check stock?
- Who has access to bank accounts?
- Who reconciles the bank statements?
- Who collects the mail and how is it distributed?
- How are bills or invoices inputted?
- Who deposits the checks?
- What do you do with stale checks?
Tips for Internal Controls & Accounting Procedures:
- Create monetary limits for single signers.
- Make sure the person who signs the checks doesn’t reconcile the bank statements too.
- Set up modified internal controls for those companies who only have one accountant signing checks and reconciling bank statements.
- Confirm that there is documented support for every check written, whether it’s an email, letter or invoice.
- Properly file the source documents.
- Keep a record of all the checks written and make sure all the check numbers line up.
- Create a policy to remit against outdated checks, making sure not to code against revenue.
- Mark all incoming mail with a received stamp date.
Is your company ready for accounting help? Schedule a consultation to learn how you can better your accounting procedures and internal controls.