Who has access to your company's cash?

20th October 2017

Out of the countless bank mandates I’ve looked at over the years, there’s one I’ll never forget. Why? Because there were more dead people named on it than living. True story – there were five people on the list, and just two of those were still alive!

But before you laugh too hard, ask yourself whether you’re really aware of what’s happening with your company’s money?

My message in these latest blogs has been that you need to take extra care when one person holds outsized responsibility over your finances, to prevent mistakes and fraud.

But what exactly should you watch out for? At minimum, there are three questions business owners really need to know the answers to:

  1. Who has access to my company’s cash? When was the last time you looked at your company’s bank mandate….? Those are the people who are allowed to carry out transactions on your behalf. Make sure that here are no former employees, people you don’t trust – and of course, it’s always good if the people are alive… ?
  2. Who can authorise spending that cash?  I'm very deliberately not saying ‘Who can sign cheques on your behalf’. That’s not nearly as important as who allows that purchase to go ahead, sometimes weeks and even months before it’s paid for.

    Make sure you are fully aware who is able to make orders for your company. Not only is this important to control mistakes and fraud, it will also help you control expenditure and stock.
  3. Are you sure the numbers you're being given are correct? Everything in your business depends on having accurate numbers to work with. Get these wrong, and you won’t have a clear idea of where you stand financially, and every subsequent financial decision you make will be skewed.

If there’s just one person who has most of the responsibility for your finances, there’s no way of knowing for sure that your numbers are right. (I’ve seen several bad cases, most memorably a company that submitted annual accounts without any financial records whatsoever to base them on.)

So how do you tell? You should have your numbers independently verified or even formally audited.

Submitting to a voluntary audit sounds like a big step, but really all it means is that accountants who aren’t within your business sign off your books.

In fact, it wasn’t long ago that nearly all companies had to submit their accounts for independent auditing by law. But in an effort to reduce red tape bigger and bigger businesses have been allowed to escape it, and nowadays you need a turnover of £10.2m before it’s obligatory.

As a business owner myself, I’m certainly no fan of red tape. But I think it’s wrong that limited liability gives businesses owners protection from being personally liable while there is no obligation to have their accounts independently audited (unless they are now of a very good size).

The price of getting the benefits of being a limited liability company should be that there’s complete transparency with the books. And in reality, it protects you, so you can be sure that your cash is being handled with due care and safety.

Of course an alternative is to have a large finance department with more than one qualified person preparing your accounts.

If you’re not quite at the stage where you want a finance department internally, but you’re turning over enough (£1-£2 million) that your financial management need to be professionalised, you can always outsource the job to us. After all, we are the outsourced finance department….

Just contact me to see how we can help you.

Contact Enquiry Form