Landscaping business owners have one thing in common – they are busy, especially during peak season. Being busy, and overly trusting of employees are leading factors in why business owners don’t segregate accounting duties. I have seen many business owners leave all the accounting functions in the hands of a single employee. This is risky, and measures should be taken to make sure one employee does not handle the entire accounting system.
Without segregation of duties there is an increased risk of fraud, errors, and inefficiency. Segregating duties in your accounting system means that multiple people are being held responsible for the end product. Having more than one person around the accounting function will deter employees from attempting fraud in the first place. Some processes to implement to reduce the chance of fraud are below:
– The employee that conducts cash deposits should not also be the same person reconciling the accounts.
– Always require that as the business owner that you review and sign off on payroll.
– Review the financials on a regular basis, and take note of any break in normal patterns.
Humans aren’t perfect, but having multiple employees involved in the accounting process can reduce the chance for human error. You can lower the risk of error by following these points:
– Hire an accounting team, a remote accountant/bookkeeper can be a great asset for your business. To reduce the risk of errors, leave the accounting to a team of experts.
– If an error does occur, then put procedures in place to prevent it from happening again in the future.
– Have a solid process for making sure all the expenses are being documented.
You may know all the in’s and out’s of landscaping, but may not be as well versed in accounting. This inexperience in accounting often leads to inefficiencies. Your administrative assistant’s time may not be best spent doing the bookkeeping, or your manager may not be efficient at putting together a cash flow forecast. Assign tasks to your team based on their strengths. These steps should be taken to assess the experience and strengths of your accounting team and allocate duties accordingly:
– Identify and eliminate any duplicate efforts. Its great that multiple people know the accounting process, but you don’t want redundancy.
– Create a list of all the accounting duties that need to be done, assign them to a specific team member, and hold them accountable.
– Make sure each employee has a clear understanding of their role within the accounting system.
Segregation of duties is a fundamental element of internal controls within your business. It should be viewed within your business as part of the frame of its risk management activities. Make this a priority, protect your business.