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A List of Homemade Control Procedures for the Entrepreneur

Apr 24th 2009
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This semester I am teaching a class titled: Financial Controls for Entrepreneurs. As part of my lecture material I’ve handed out a list of basic controls a small entrepreneur might wish to consider. Some of the controls can only happen as staff is added.

  1. The owner should sign all checks.
  2. Bank statements with cleared checks—showing endorsements, should be mailed to the owner’s attention. The owner should, among other things, look at the endorsement, i.e., is there anything fishy about it?
  3. Prepare a timely bank reconciliation which is reviewed by the owner. The outstanding check list should be reviewed for any stale dated items.
  4. Make sure all customer checks received at the office show up on the bank statement. Run daily check received amount totals that should agree with total deposits shown on the statement after considering deposits in transit.
  5. Reconcile all cash drawers at the end of each shift. Beginning shift cash balance plus receipts equals ending shift balance. Use the cash register tape as control. Expenses should not be paid out of the drawer.
  6. Use three-point processing (matching purchase order, packing slip and invoice) before paying bills.
  7. The person preparing payments to vendors should not place orders to, or receive goods from, these vendors.
  8. The person sending out invoices to customers should not handle incoming customer checks.
  9. Invoices from vendors should be received via mail or email only and not hand carried in by an employee.
  10. Vendor invoices should be to the attention of accounts payable not to the person working that desk.
  11. The owner should review the supporting documentation before signing a check.
  12. Expenses by account number should be compared side by side, month to month for reasonableness.
  13. If an outside accountant or payroll service is handling your payroll tax deposits, make sure you see proof that they were made. To the IRS, you are ultimately responsible for the dollars.
  14. Review customer accounts for old unpaid invoices. They may have already been paid.
  15. Keep track of blank check stock---go looking for missing numbers.
  16. Voided signed checks should have the signature torn out and into bits.
  17. If a customer always pays late, call them the day any invoice is due and ask for payment status. Get check number, date and amount if possible. After a while, with any luck, you’ll be on their minds when they decide which bills to pay and you’ll likely not have to call as much.
  18. Randomly check inventory levels yourself. Let your employees see this.
  19. Your petty cash box should be an impress type which should be reconcile monthly with the general ledger and audited by the owner.
  20. Invoices to customers should be numbered controlled. Account for all invoices including unused.
  21. Employee parking should be controlled and fenced off from inventory.
  22. Visitors should enter and exit through the office and should sign a log.
  23. Unusual inventory shrinkage should be investigated.
  24. All utility bills and freight bills should be approved by the most knowledgeable employee and compared to the prior month for reasonableness.
  25. Employees should not be allowed to use the company’s delivery service (e.g., UPS) or postage machine for personal use even if the company is reimbursed.
  26. Office supplies should be ordered by the same person no more than bi-weekly. Keep minimum amounts on hand.
  27. Use a central network printer rather than individual printers.

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