How to Ensure Your Accountant is Performing Proper Bookkeeping
Running a business involves numerous responsibilities, one of which is keeping accurate financial records. Unfortunately, business owners often rely on accountants and bookkeepers for this task. However, there's no foolproof way to know if your accountant is performing proper bookkeeping unless you take proactive measures. This article outlines several steps you can take to ensure that your accountant is doing their job correctly and transparently.
The Importance of Proper Bookkeeping
Proper bookkeeping isn't simply a matter of daily bookkeeping tasks; it involves maintaining accurate, comprehensive, and timely financial records. Good bookkeeping ensures that you can accurately track revenue, expenses, and other financial data, which is essential for making informed business decisions.
Steps to Ensure Proper Bookkeeping
1. Basic Bookkeeping/Accounting Course
One of the first steps you can take is to have a basic understanding of bookkeeping and accounting yourself. Attending a course in bookkeeping or accounting can provide you with invaluable insights into the processes involved. This knowledge can help you detect any irregularities or discrepancies that might arise in your financial records.
2. Divide the Duties
It's crucial to divide the responsibility of handling financial tasks to prevent conflicts of interest. For example, the person writing checks should not be the same person who signs them. Additionally, all bills and checks should be paperclipped together so that the check signer can review them before signing.
3. Bank Account Security
The owner of the business should have exclusive access to the bank account. The bookkeeper or accountant should only be able to view the financial statements and not have the authority to make transactions. This ensures that the bookkeeper cannot manipulate the financial records for personal gain.
Monitor Financial Records
As the business owner, it's important to regularly review your financial records. You should be able to generate and pull reports from your bookkeeping system without needing to ask the bookkeeper to do it. Performing random checks without prior notice can help you stay alert and catch any potential issues early on.
Examples of Misconduct
Upon reviewing the lists of accountants and bookkeepers who have failed to perform their duties properly, some frequent issues stand out:
Lack of Proper Outourced Payroll
For instance, an accountant might miss posting outsourced payroll accurately, leading to issues like delayed 401K contributions. They might not update the payroll deduction amounts, and fail to adjust the payroll insurance contribution when premiums change. Even when the accountant had previously performed well at a CPA firm, poorly keeping records can result in financial discrepancies.
Embezzlement by Bookkeepers
Another significant issue is embezzlement by bookkeepers. A bookkeeper might be taking a course in embezzlement and secretly stealing money from the company they're working for. Unfortunately, some accountants overlook these issues, particularly when the bookkeeper fails to provide the full set of financial records. Other red flags include late fees on payments, which an conscientious accountant would likely address promptly.
Conclusion
Ensuring proper bookkeeping is a critical aspect of running a successful business. By following the steps outlined in this article and staying vigilant, you can help prevent financial discrepancies and ensure the integrity of your financial records. Remember, knowledge and proactive measures are key to maintaining transparency and trust within your business environment.