Important Steps To Protect Your Company Assets

by James on December 1, 2015 · 0 comments

imac-606765_640The decisions you make when you form your business have a huge impact over time. Perhaps the most important decisions relate to handling money. If you’re not clear about how money will be handled, your firm may be subject to fraud and theft. Use the following tips to properly handle money at your startup firm.

Business structure

Work with an accountant and an attorney to decide on your company structure. Generally, your business can be structured in one of three ways:

·  Sole proprietor: This is a business with a single owner. In many cases, the profit and loss of the firm is posted to the owner’s personal tax return. While being a sole proprietor simplifies your business, it’s critical that you keep your business and personal transactions separated.

·  Partnership: A partnership is an agreement between two or more people to conduct business. The business operates based on a partnership agreement. When you set up your bank account, you may have to provide your partnership agreement to the bank. Partners have a degree of liability for the actions of other partners. The partnership files its own tax return, but the profits and losses flow through to the partner’s personal tax returns.

·  Corporation: A corporation is a completely separate entity from the owners of the business. Your corporation files a tax return and pays taxes based on the net profits. You file paperwork with your Secretary of State to form your corporation. To open a bank account, you’ll provide the articles of incorporation from the State.

Work with an accountant and an attorney to understand the tax and legal issues for each type of business structure.

Setting up your bank account

As mentioned above, your bank will ask for several types of documents, depending on your business structure. You’ll also be asked to provide the IRS tax identification number for your business. A sole proprietor will provide his or her social security number. Other businesses will use an employer identification number (EIN).

In addition, you’ll need to provide the name, job title and signature for each person who will be authorized to sign checks. Unless you are a sole proprietor, you should have at least two authorized signers for checks. If one check signer is out of the office, you can still get checks signed and do business.

One decision that may save you time and expense is to outsource your payroll processing service. If you do, you’ll need to link the payroll company to your company bank account. ADP Compliance Insights explains that a payroll company can calculate all employee withholdings and then submit the net payment amounts to workers by using your bank account.

Written procedures

Think carefully about how you do business, and document tasks in a written procedures manual. A manual is particularly important for tasks involving cash. You should document how you will invoice customers and deposit their payments, for example. A business should decide what documentation is required before they pay an invoice.

Segregation of duties

Business owners write procedures so that responsibilities are properly segregated. This is critically important for your business. If you don’t segregate duties between different people, you open yourself up to the possibility of fraud or theft.

Assume, for example, that you’re writing procedures for paying invoices. There are three duties that need to be segregated whenever possible:

·  Custody of assets: Someone has physical custody of certain business assets. Having keys to the warehouse means that you have custody of assets. To pay invoices, someone must have custody of the company checkbook. Assume that the administrative assistant has the checkbook

·  Authority to move assets: To move cash, someone signs a check. In this case, assume that the owner has authority to sign checks. Unless you are a sole proprietor, the check signer should not also have the checkbook.

·  Record keeping: The individual who reconciles the checkbook should be a 3rd person- not the administrative assistant or the owner. Reconciling your checkbook in a timely manner is vital. The reconciliation may catch fraudulent transactions.

Starting your business requires many decisions. Think through how you will manage money in your business. If you document your procedures and segregate duties, you can prevent fraud and theft.

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