What is the main conflict of interset with the same person doing Accounts Payable and Accounts Receivable?
Answers
From a different perspective, in smaller organizations you could have two people cross-checking each other (one does the input, the other does the execution, for AP in one direction, and AR in the other).
It is most important, however, that you get 2-deep on transactions. If you don't have the staff for it, then the owner should be reviewing transactions.
If you are in that position, consider talking to your boss/the owner and outline for him/her what controls that s/he should expect and support. E.g. s/he should sign each AP invoice before you run checks, s/he should review check v invoices when signing the checks.
S/he should review AR summaries, especially cash application v bank deposits and s/he should know what AP checks are uncleared (from regular bank recs).
That way you have made it clear that you alone will not be responsible for these tasks and can therefore avoid assumptions of fraud. How well do you know your boss/owner to have this conversation?
This problem affects all small businesses.
-1 The owner needs to be aware of what is transpiring in their company.
1. the bookkeeper should never have signatory powers.
a. never sign blank checks!
2. the owner should look at each deposit (a copy of the deposit ticket and checks suffices) to see who is indeed paying the company.
3. checks should be written only when all the supporting documentation is available for review.
4. the owner should review, as Len stated, the bank reconciliations.
5. the owner needs to be aware of what is transpiring in their company, because ultimately it comes down to awareness, and most small business owners aren't interested in
When I started my first software company, I was in charge of sales,
I had my then wife do the billing and check deposits. For a year and a half, everything seemed good. I instructed her to put 25% of every check that comes in, into a savings account for taxes. She agreed this was a good idea.
I thought nothing more of it, trusting she would be diligent. Then,
The money was gone...well over $50K just not there! Her answer as to where it was, was, "I don't know!" followed by. "This is your company. You should be responsible for this money!"
Not only was that money missing, there was no record of her sending out bills to clients who owed substantial amounts. Were it not my wife, I would have called the cops on her. Instead I resolved to pay all outstanding taxes. In the meantime, I had to close the company and put several people out of work.
We divorced soon after that.
I paid the taxes, eventually. I never found the money, but she lived pretty well for a long time, without income of any sort.
Now, had I had someone handling one side, AP, and another handling AR, one might have gave me a heads up about the missing money. Having delegated both to the same person, the missing money and lack of effort to collect were unnoticed until disaster struck.