Cash is the lifeblood of any business.
It becomes even more critical if you suspect that your financial statements are wrong, you aren’t getting your financial statements in a timely manner or if you start experiencing a downturn in business.
If you aren’t getting your financial statements on time or they are constantly filled with mistakes, don’t accept excuses from your bookkeeper. His or her job is getting you the information you need in a timely manner. If you don’t get your statements on time for some lame reason, the bookkeeper is either incompetent or stealing from you. Decide which is happening in your business and take action.
What if you are switching computer systems? Then you should be running dual systems for a few months to ensure that the switch is proper.
What if you are starting to experience a downturn in business? Many contractors I’ve talked with still have plenty of customers. However, they aren’t buying “platinum” systems. They are buying the “bronze” and conserving cash.
Whatever the reason, cash must be controlled and monitored. Without it, you cannot survive long. Even if you have a profitable company, if you don’t turn those profits into cash, you will still be out of business.
Protect itOnce the cash comes in the door, you have to take steps to protect it. Cash procedures keep honest people honest. They show that you are watching and take cash handling seriously. There is much less temptation to steal when the procedures are in place.
Let me say that 99.9 percent of the population would never steal under normal circumstances. However, a divorce, sickness or other crisis can make normally rational people irrational. I’ve seen it too many times.
So lock up your checks. Courts have ruled that if there is a theft and your checks are not locked, the bank isn’t responsible.
Second, look at your checks when you are signing them. This sounds rather obvious. However, I’ve seen owners just sign checks without looking at them first. They don’t match the invoices with the amounts on the checks. They miss a payroll check that has an extra zero in it. You have to be careful and look at what you are signing.
Next, have your bank statements sent to your home. That will ensure you are the first to look at them. It doesn’t take much time to review them. In addition, you see everything related to your cash first: bounced checks, late loan payments, etc. Look at the checks (or copies of them) to ensure that you know whom the vendor is.
Be careful with similar names (“ABC Co.” or “ABC Distributing”). This could be a sign that someone has opened an account and diverted money to it. When you are signing checks, even if the stack is an inch thick and you are in a hurry, look at each check.
PrivilegesThe person balancing the checkbook should not have check-signing privileges. This is to ensure that someone cannot sign a check and hide it when balancing the checkbook.
You must keep an accurate account of cash. This should be done every week at a minimum, or even every day. You need to know what cash has come in the door, what should be coming in the door (receivables) and what needs to go out the door (paying bills and payroll).
Cash floating around your building, in your parking lots, and on the floors of vans is unacceptable. Safeguard your cash. Here’s a true example of what can happen when you don’t.
The owner of an HVAC company was walking into his building one morning and saw a flying piece of paper out of the corner of his eye. He caught it. When he looked at the paper, he was surprised to see that it was a customer’s check. Because of its amount, he assumed it was from a service call. The owner decided to put the check in his desk, say nothing and see what would happen.
Sure enough, a few days later, his bookkeeper came to him with the situation that a check was missing from a service ticket. According to the bookkeeper, the service technician swore he turned the check in with his paperwork. The dispatcher swore she didn’t get it. They couldn’t call the customer and ask whether she said she paid the bill because the technician wrote the check number on the service ticket. What should she do?
At this point the owner pulled the check out of his drawer and told the bookkeeper he saw the check floating around in the parking lot. He also talked with the service manager to ensure that this would never happen again.
All service technicians were issued staplers. They were to staple the check, cash or credit card receipt to the service ticket when they got into the truck.
The technicians continued to turn in their paperwork to the dispatcher as always. However, the dispatcher took the time to ensure that money was received right in front of the technician. There hasn’t been another question about whether a customer paid a bill since. The flow of cash as it relates to that service ticket is always tracked.
Copyright 2008, Ruth King. All rights reserved. Write to Ruth King, 1650 Oakbrook Drive, Suite 405, Norcross, GA 30093. Call (800) 511-6844; e-mail firstname.lastname@example.org.