Segregation of Duties for businesses with limited staff

Segregation of Duties for businesses with limited staff

September 18, 2017 | Symphona

Small businesses often face the problem of properly separating job functions due to limited staffing.  Having one employee performing such tasks as reconciling the bank statement, paying the company bills, receiving customer payments and making the related general ledger entries increases the company’s risk of possible employee fraud and theft.  However, most small businesses do not have the resources to hire additional staff to ensure all job functions are appropriately segregated between different employees.  Business owners must simply accept this risk.  If this scenario sounds all too familiar for your company, the following are simple procedures that can be implemented:

  • Have two employees sign all Company checks.  One of these employees should be an officer of the Company.
  • Have an employee that does not pay bills approve all invoices before they are paid.
  • Have an officer of the Company review the monthly bank statements and reconcilements for the Company’s operating account.
    •  If possible, do not let the same employee reconcile the Bank statement and post general ledger transactions.
  • Have an officer of the Company review the approved vendor list periodically throughout the year and investigate any unusual or unknown vendors.
  • Have an officer of the Company review the business financial statements as often as available to help identify any large and unanticipated fluctuations.
  • Implement a “fraud hotline” or communication tool so that employees can anonymously report any suspicious activity.
  • Finally, install mandatory vacations for all employees and have other employees perform the same job functions while the employee is gone.  This is a must.  Many fraudulent schemes are identified when the employee committing the fraud is on vacation and other employees notice irregularities and unusual items in the employee’s work.

The procedures listed above will not eliminate all possible fraud or theft but they can help reduce the risk.  As mentioned, business owners must determine how much risk they are willing to accept versus using additional resources to hire more staff.  TJS Deemer Dana would be glad to help your Company implement some of the procedures identified above or answer any questions you may have.


Written by:

Ryan Brinson