Do you know all the stories your accounting data can tell? At OnePoint, we’ve seen first-hand how consistent accounting processes can assist our franchise owners with forecasting, identifying trends and even enable you to catch theft. Today we sit down with OnePoint’s Manager of Accounting, Regina Leong, and Senior Accountant, Bernadette Gonzalez to discuss all the valuable information lurking in your cash over and short account.
“After sales have been imported and recorded the next step is reconciling the bank statement,” says Bernadette, “One of the biggest mistakes we see clients make is blindly trusting whatever the bank statement reads.”
Examining point of sale records and deposit records side by side with the bank statement is the first step in affirming your accounting processes are working as they should. This singular step uncovers over a third of the discrepancies.
“Querying bank statements alongside POS transactions works best when clients make daily deposits separately, instead of lumping them all together,” says Regina. Even if the bank is visited weekly, keep the daily deposits separate to better pinpoint exactly which day and which employee was responsible for making the deposit.
Though, as Bernadette points out, franchisees should really aim for a protocol where the bank is visited daily. “It becomes a security issue,” she says, “All that cash sitting around in your safe isn’t a good idea. In fact, we had a client who didn’t want to visit the bank every day and a lot of their sales were in cash. They were robbed and it ended up being very costly for them.”
Any discrepancies identified from reconciling the bank statement become valuable tools in analyzing whether errors are due to theft or some other cause. With enough information, the root issue can be uncovered with further investigation to see if it really is theft, a training error or even a bank error.
First, examine if there is a pattern to those errors. Consider the following questions to help discover the root of the problem.
Is there a correlation between when errors occur and when certain employees are staffed?
Bernadette and Regina had a client who continuously had discrepancies in their cash over and short account. It wasn’t until they compared the errors with the staff schedule that they discovered the problem was stemming from one manager who wasn’t making the deposits on time.
A common kind of fraud to look out for can also be discovered through examining staffing schedules. Employees can key in a cash sale as a credit card sale and then pocket the cash, blaming the credit card company for shorting the sale.
Tracking errors to patterns in staffing can help you see if you have a training deficit or a thief in your midst.
Is your team trained and adhering to proper ring up procedures?
Unaccounted for sales or employee tax can be one source of discrepancies. “One of my accounts was consistently experiencing a cash short and there were always strong discrepancies,” says Bernadette
. “Once we took a closer look, we uncovered that it was stemming from their ring up procedures. This is why it’s important to examine all of your accounts when you’re looking for the source of the error. We informed the client, they adjusted their training procedures and the errors stopped.”
Special promotions are another potential error source that can be guarded against with proper training. If your staff isn’t properly trained on how to handle discounts and promotional offers, you might face discrepancies on your next bank statement.
Do you have a good Quality Assurance system?
In addition to clear processes and good training, a quality assurance system can also prevent errors and help uncover the source of them when they do occur. A good QA will require log ins from all employees, leaving a trail of evidence in the event of any reports of irregularities that may occur during an employee’s shift. “One of our clients was able to uncover theft because they had such strong processes and QA systems in place,” says Regina, “They had three different managers for three different shifts. Instead of one daily deposit each manager was responsible for a deposit at the end of their shift. When $24,000 went missing one month, we were able to pinpoint which deposits were missing and which employee was responsible for it.”
Another element of a good QA is dual verification. Implement a process that has two people count the deposit and two people verify the drop. Also set up clear policies for how frequently you drop and how much money you leave in your safe. This will not only help prevent errors, but help you identify the source of them when they occur.
Could it be a vendor error?
Business owners need to know not to automatically trust delivery services, merchant processers, banks and other vendors. “Banks make a ton of errors, we see it all the time,” says Regina, “This is why record keeping is important. Always keep a record of what you take to the bank, what checks you’re writing, all of it. These errors can be very costly.”
Sometimes a deposit may make it to the bank, but then the bank codes it incorrectly. “You could send a deposit to the bank for $15,000 dollars and it either doesn’t clear, never posts or it clears for $15 not $15,000,” Bernadette warns.
Credit cards aren’t immune from error either. Sometimes the sensors don’t pay the correct amount or make the right deposit so verify all of your sales.
Delivery service companies are capable of committing the same errors too. They might not credit you the right amount of money or there could be an error on your invoice.
Digging deeper into these discrepancies can help you not only identify the cause of missing cash, but also ensure the overall accuracy of your financial statements.
“There are so many transactions that happen every day in the POS system. If the ring ups are correct then we know we can expect a certain amount of money,” says Regina. “If not all of that money is there, that’s when we begin to investigate vendors, third party merchants, banks, employee training, store procedures or employee theft.
Get an accounting partner
Bottom line? You are responsible for creating strong systems and processes for verifying your deposits, invoices and transactions. And it can be overwhelming to find the time to review all of these important financial documents and successfully run the other aspects of your business at the same time. At OnePoint, our clients rely on us as their trusted accounting partner to monitor for discrepancies and identify problem areas. A good accounting vendor will provide that second set of eyes on your data to help you avoid costly errors and employee theft.
