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Posted on: August 12, 2021 by Huntersure
In 2020, 2.2 million people filed claims of fraud with the Federal Trade Commission. 34 percent of these claims involved stolen money, causing over $3.3 billion in losses.
When you’re meeting with accounting clients about accountant professional liability coverage, fraud should be one of your top discussion topics. Encouraging your clients to regularly reconcile their accounts, or check whether their bank statements and accounting records match, is one of the best ways to prevent fraud. If your clients are new to this concept, here are some of the best practices for account reconciliation.
How often should business accounts be reconciled? Most experts recommend reconciliation once a month. This gives employees and vendors time to cash their checks and complete their accounts receivable, and it allows your clients to review two pay periods at once. If your clients have histories of fraud, though, they can check their online banking software weekly or daily to make sure no one is stealing their money.
Before your clients start comparing their bank accounts and bookkeeping records, they should verify that they are looking at the correct pay period information. Some customers’ payments and employees’ wages may be the same from week to week, but other expenses occur irregularly. Also, requesting a bank statement with extra days on either end of the pay period will prevent their bottom lines from aligning.
Most accountants don’t note bank fees in their books, so these extra charges could show up in your clients’ banking statements without their knowledge. Usually, these withdrawals are clearly labeled on the statement, and your clients can request that their banks notify them whenever they impose fees. For example, if your clients use overdrafts, their banks probably charge them interest on the excess withdrawals.
Once your accountant professional liability clients are in the habit of regular business account reconciliations, encourage them to note their banking fees, interest, and other payments in their internal records. That way, if they ever get audited, they know where every cent comes from.
Although checks are not as common as they used to be, many business owners use them to pay their vendors, and some employees prefer them to direct deposit payment options. If your clients use checks, their internal bookkeeping records may show a lower balance than their banking statements. This happens if their accounting team records a check and the recipient waits to cash it.
Finally, if your clients encounter unusual activity that is not related to bank fees or uncashed checks, they should report it to their bank immediately. The FTC can also help if they suspect fraud has occurred.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.
Posted in: Accounting