Setting up internal controls within your organization is one of the best ways you can detect and prevent business fraud. Leaving all of your financial processes to one employee increases the chances of your company being “ripped off.” This is why control processes such as dividing bookkeeping, payroll, and inventory among employees are so important. Luckily, QuickBooks® has many features that make setting up internal controls a relatively easy process. Here are just a few of them:
Reconciliation and Payment Validation
Check tampering is a fraudulent activity that can cost businesses thousands of dollars. A check is tampered with when an employee prepares a check in their name, cashes the check, and then changes the payee field on the electronic check to a vendor. This is why there needs to be a separation of duties among the staff. The person doing the bank reconciliation should not be the same person who cuts the checks. This way, the person reconciling the bank account can confirm that the payee on the check equals the payee recorded inside of QuickBooks®. It is also imperative that prior periods are locked down, to prevent changes from being made to previously reconciled months.
Audit Trail Reports
When you have multiple users accessing your QuickBooks® data file, you can run an audit trail report to see who made which changes to your QuickBooks® data. This report allows you to identify fraud by scanning for changed payee entries. An audit trail report allows you to filter by transaction type, user, and other factors, so you can see if there are any unauthorized changes, and identify the guilty party. For this reason, it’s critical that you define separate password-protected user accounts with defined roles to not only identify fraudulent activity, but to help deter it in the first place. Additionally, since 2006, all QuickBook®s editions have a permanent audit trail function, meaning it cannot be disabled. This means all transactions are recorded in the QuickBooks® history, making it easier to discourage check abuse in addition to other business fraud activities.
Limiting Access in QuickBooks
QuickBooks Enterprise Solutions is designed for multiple users. You can purchase Enterprise editions for 5, 10, and up to 30 users, depending on the size of your finance department. One advantage QuickBooks® Enterprise Solutions has over the standard QuickBooks® is it allows you to limit users by screen or by bank account. You can set it up so that your employees are allowed to view and print transactions, but not allowed to delete or modify a transaction. This enables you to review your month-end closing reports to ensure that the limited few who have the ability to change transactions, are not taking the ability to their advantage. Once again, in order for this to be an effective deterrent to fraud, you must create separate password-protected user accounts.
Payroll Tracking
In addition to limiting access to credit memos and transaction details, QuickBooks® Enterprise Solutions allows you to restrict rights for editing payroll transactions. Limiting these rights can reduce the risk of payroll fraud. For example, an employee who is able to edit year-to-date payroll can change their withholdings amount to an amount higher than what they actually have withheld. The company then makes up the difference through a payroll tax deposit, and the employee can then claim a higher tax refund. Limiting payroll editing rights to a handful can help avoid this type of situation.
