When it comes to documenting your commercial cash flow, you can't afford to take chances, especially if you have to answer to a board of directors, shareholders or other investors. They'll want to know where the money is going, and it will be up to you to provide that documentation. When financial reporting becomes necessary, you'll need to make sure that everything is in order. One bookkeeping error or discrepancy could put you at risk for an audit, which can spell disaster for your business. Here are four steps you can take to prevent errors and omissions with your financial records.
Have Separate Cash Handlers and Record Keepers
If your business is like most, there's a steady flow of cash through the office. That flow of cash needs to be well-documented. However, you need to make sure that the job duties of the cash handlers and the record keepers are kept separate. The last thing you want is to have the cash handlers also responsible for the record keeping. To avoid financial issues, never have your cash handlers be the ones who record the daily cash transactions. Instead, utilize the cash handlers to accept the cash payments, while your record keepers document the transactions at the end of the day.
Keep the Authorizations and the Payments Separate
Operational payments are another area that can cause problems for businesses, especially if the same person – or persons – are responsible for authorizing and processing the payments. To make sure that you have a clear line of authority, you need to have separate departments in charge of the authorization and processing of payments.
Ensure a System of Checks and Balances
When it comes to keeping a handle on the money that flows through your office, it's crucial that you set up a system of checks and balances. One way to do that is to ensure that your financial department consists of multiple personnel who all have separate job descriptions and duties. Utilizing an entire staff to conduct the financial business for your company will ensure that no one person is in charge of all the transactions.
Be Protective of How Your Transactions are Recorded
A final word of caution involves how your financial transactions are recorded – and by whom. If you want to ensure that your records are protected against errors and omissions, it's important that you separate the responsibilities for daily transactions and the actual financial record-keeping. Having one person record the daily transactions and another person go over those transactions before recording them in the books will help alleviate bookkeeping errors and omissions.
If you own a business, you need to make sure that your financial records are free of errors and omissions, especially when it comes to financial reporting. Use the tips provided here to help avoid problems with your books. For more information, contact a company like Stone Bridge Search.