Tag Archives | bank statement

Accounting Fraud Prevention Using Quickbooks

See Also:
Accounting Depreciation
Account Reconciliation
Cash Flow Projections
How to Develop a Daily Cash Report
Future of the Accounting Workforce

Accounting Fraud Prevention Using Quickbooks

A small business owner typically cannot afford to hire enough people to have proper separation of duties to gain the internal controls needed to prevent accounting fraud.

Using Internal Controls

Stephen King, CEO of GrowthForce, says that, “Internal controls can help reduce the risk of fraud, make it easier to train and manage staff, and help your company run efficiently by having solid processes and control activities in place.” The place where most companies encounter fraud is in their own company, so it’s critical that every company sets up internal controls and continues to update them as changes occur.


Download eBook The CEO's Guide to Reducing Fraud


Prevent Accounting Fraud

Every business owner can achieve accounting fraud prevention by taking these simple steps:

1. Open the Bank Statement Yourself

Every small business owner should receive the unopened bank statement. Then they should review each check for authorized payee and signature and approve electronic payments. Only after they do the above should they give it to the bookkeeper.

2. Don’t Let Your Bookkeeper Reconcile the Bank Account

The person who pays the bills should never reconcile the bank account. That’s how they cover their tracks. If you don’t have someone else to do it, then this is an easy function to outsource.

3. Close the Prior Accounting Periods

QuickBooks now has a way to lock down the prior periods. Once you produce a financial statement, that period should be “closed”. As a result, this reduces the risk of hiding a fraudulent transaction in a prior year.

4. Attach Scanned Images to Each Accounting Transaction

Most fraud occurs from check tampering. For example, the bookkeeper changes the payee to themselves. Prevent accounting fraud by scanning the bill and linking it to each accounting transaction inside QuickBooks. Thus, this makes it harder to fake a bill.

5. Set Up Username for Each User

QuickBooks now has an audit trail report which can never be turned off; however, if your staff login as “Administrator,” then you have no idea who made what entry. Set up a username for each user that way you can track who did what and when.

6. Restrict User Access

QuickBooks Enterprise Solutions has the ability to restrict access per user per screen. Make sure you have separation of duties between authorization, record keeping, and custodial responsibilities for each accounting transaction.

No system of internal control should be built on trust. The best accounting practice is to separate out the following functions: authorization, record keeping, and custodial responsibility for assets in each accounting transaction.

The CEO's Guide to Reducing Fraud


Originally posted by Jim Wilkinson on July 23, 2013. 

accounting fraud prevention using quickbooks, accounting fraud prevention

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Bank Statement

See Also:
5 C’s of Credit (5 C’s of Banking)
Bank Charge
Bank Reconciliation
Financial Position
Line of Credit (Bank Line)

Bank Statement Definition

bank statement, defined as the statement received from a bank after each month as a customer, is one of the most basic accounting statements to exist. Bank statements usually include the available balance, existing balance, deposits, withdrawals, interest, fees, penalties, and possibly more.

Bank Statement Explanation

A bank statement, explained as the statement which reflects your banking history, is as much a document for business as it is one for personal life. Bank statement analysis provides information about the recent banking history of a customer. They provide value on multiple levels.

First, they tell the client about the existing balance in their account. For a business, the combination of all accounts is close to the cash balance.

Second, bank statements show deposits. This provides another record of deposits made to the account which is separate from accounting statements. The value of this is evident to accountants: they love redundancy in financial statements and documents.

Third, a bank statement reflects withdrawals. This has many benefits: showing transfers of funds, expenditure of funds, and perhaps may even indicate a withdrawal which was not permitted.

Fourth, bank statements show interest. This is another income which the company has received and must be included in the financial statements of the business. It also shows the value created by funds which are in the bank. This becomes a measuring point for comparison in the return on investment in other projects.

Fifth, it included fees and penalties. This shows the cost of keeping the bank account. Additionally, it shows the mistakes that have been made while keeping the bank account. Though these penalties are a cost they are also a test. Penalties show that a business has room for improvement.

Though bank statements are a common document they are also a tool. Accountants and company controllers know this. Even the personal bookkeeper, managing the funds that they make themselves, know the true value of bank statement accounting.


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Bank Statement Example

John is just starting his small business. John, a local farmer, grows hay in his many fields. Though he does not see himself as an entrepreneur John intends to grow his profits. He truly is an entrepreneur: he is in charge of his future and wants it that way.

John is also his own accountant. He uses quickbooks to keep records of what he spends and what he makes. To John, his statements are one of the most important financial records. He will learn this later when he experiences bank statement errors.

Recently, John realized his account balance is was too low. Thanks to internet banking, he realized fraud has occurred in the form of theft. Someone has his card number and is using it for their own gain.

John makes quick work of this. He calls and is able to take care of the theft. Due to the fact that his bank has fraud prevention he eventually receives his funds back. John is set to ease with this result and can move on to grow his business.

John’s experience mirrors that of a larger business. Instead of personal theft, he would have called an External Auditor in to his business. Whether large or small business bank statement retention is a policy which keeps documents that have powerful value.

If you want to add more value to your organization, then click here to download the Know Your Economics Worksheet.

bank statement definition

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Bank Reconciliation

See Also:
How to manage your banking relationship.
Which Bank to Choose?
Is It Time To Find A New Bank?
5 C’s of Credit (5 C’s of Banking)

Bank Reconciliation Definition

The bank reconciliation definition is the settlement of records between the balance per company financials and the balance per the bank statement. The process of accounting bank statement reconciliation is essential because of the many timing differences and errors in the recording process between two parties. When effectively implemented it assures that the bank as well as the business have relevant financial statements.

Bank Reconciliation Meaning

Bank reconciliation means reconciling financial statements which are owned by both the business itself and the bank statement. Without bringing these 2 records together the process of bank reconciliations would not bring value. From here each account is checked with records to assure a purchase date, income or expenditure, notes or additional needs, and more. This part, specifically, is where many differences arise. The cause of these may include bank deposit and work hours, policies and procedures for both entities, and more. Due to the different record keeping methodologies an alignment must be made to assure that each party has an operable understanding of the financial state of the company.

Bank reconciliation methods and procedures are focused on attaining adjusted cash balances which can be assembled into statements for both the bank and the associated business.

To avoid fraud while performing cash reconciliation, delegate this task to an employee who has no other connection with company cash.


Download The Know Your Economics Worksheet


Bank Reconciliation Method

To begin the bank reconciliation method, enter bank and company balance on a schedule. This will create the initial foundation for the process to proceed. It is important to include the previous bank reconciliation form, if any, to establish differences between current records and this. Once completed, the process moves on to find differences in the accounts of the current period.

Next, look for deposits in transit – any deposits not yet included in the bank forms. These are deposits recorded by the company which are not yet in the bank records. Compare the bank statement deposits with the business’ internal deposit register. Add these to bank statements to form two equal records: one for the bank and one for the firm itself.

Then, find outstanding checks – any checks issues but not yet paid. These are checks written by the company which have not yet been fulfilled by the bank. Compare bank statement listings for paid checks with checks issued by the business under the cash payments journal. Deduct these from the bank records.

Now, find any errors. An example of one such error would be a returned check recorded as $50 but is actually in the amount of $60. Bank errors, when corrected, effect the adjusted balance of company records. The inverse is the case for company errors.

Finally, compile any final changes. These can include fees, interest, and other additional notes.

Complete the bank reconciliation format in this order to cover all important issues. A solid policy must be in place for bank reconciliation statements to be useful.

Bank Reconciliation Example

For example, Minnie is the CFO for Debt Collect LLC, a privately held debt collections company. Debt Collect is in good financial condition and regularly keeps up with their accounting work. Today, Minnie’s task is to review the bank reconciliation process.

Collecting Information

Minnie begins by collecting the relevant information. She sends a memo to all company accountants instructing them to make any final changes which effect overall company financial statements. After some time, she has all of her necessary records.

Performing the Reconciliation

Minnie then sets down to perform her reconciliation. She enters both bank and company balances on a schedule. She also compares this with her previous reconciliation form.

Minnie notices deposits are not at the same level. She quickly corrected this when she accounts for deposits in transit. Finally, she has reconciled the forms, and she moves on.

Minnie then accounts for outstanding checks. Upon examination, her work reveals a major problem. Her cash payments journal is much higher than that of the bank. She looks further to discover a very high level of bounced checks. Further research shows that debt holders, convinced by company contact, are sending checks. The problem is that they are not sending fulfillable checks. After looking at company policy, she prepares some procedure changes which should prevent the company from sending non-collectible checks.

Minnie completes her bank rec with no additional problems. She is satisfied by her analysis because it yielded results that will show her to be one of the great minds of the company. She looks forward to presenting her ideas to the board of directors and helping her employer.

If you want to add more value to your organization, then click here to download the Know Your Economics Worksheet.

bank reconciliation, Bank Reconciliation Meaning, Bank Reconciliation Definition, Bank Reconciliation Method

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

bank reconciliation, Bank Reconciliation Meaning, Bank Reconciliation Definition, Bank Reconciliation Method

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