One of the biggest pains that handcuffs owners of a growing business to their desk is handling their bill payment. Don’t believe me? Ask a business owner who understands the risks they face of embezzlement and has grown large enough to have bill payment become a major pain point.
Business Bill Payment Issues
When a business first launches, bill payment is often a non-issue. You may have some payments set up on auto-pay and a couple checks you cut here and there, but it’s not much of a nuisance yet. You have lured yourself into a false sense of joy and happiness, because that story changes as your business grows.
Let’s fast forward a couple years…
Ugh, you get another text or email from your bookkeeper to come in and sign some checks…the last thing you want to do before leaving for vacation in the morning. You could just wait until you get back, but oh yeah, there’s that one check that really needs to be signed and sent before you leave. Inconveniently, you drive to the office and sign the dang check before leaving. Then, you’re on vacation and some vendor is screaming for payment and you’re scrambling to solve the problem. You’re tired of this always happening, so eventually you get in the habit of leaving a couple of signed, blank checks in a drawer.
Risk of embezzlement
Now you’ve set yourself up for embezzlement, and you may not be aware of how likely that really is. Want to know the number of clients we pick up because their previous in-house bookkeeper embezzled from them? It’s a startling large percentage, and in almost every case it happened in conjunction with business bill payment processes.
Most business owners we know start with good controls around bill payment. They approve, sign, and distribute checks. When online payments are needed with a credit card, they have make the payment without giving credit card info to any employees. In addition, they handle payments of online bills. But this can become very inconvenient! After becoming overly frustrated with the hassle, they reduce themselves to short cuts that open the door for fraud. The only two options they see are:
- Being highly involved in the bill payment process, but with A LOT of inconvenience.
- Passing off the inconvenience to someone they really trust and creating short cuts. Unfortunately, embezzlement then becomes REAL. And you must understand that everyone who has been embezzled from by an employee totally trusted that person to begin with.
A typical scenario for business bill payment
We often see business owners with a bookkeeper who handles everything having to do with paying bills. That bookkeeper keeps a box of checks in their office, a signature stamp in their desk drawer, and they are the only one doing the bookkeeping. The bookkeeper has full bank rights and manages bill pay through bank portals where they are the only ones who need to authorize payments. Does this sound like your scenario?
Hopefully you are savvy enough to see the problems here.
Business Bill Payment Solution
The good news is that in today’s world of cloud-accounting solutions, we do have the solution to your bill payment purgatory. Before we introduce you to a life-changing solution that removes the hassle without exposing you to fraud, let us paint the picture for how it works by putting it in the context of the ABC’s of segregation of duties.
The ABC’s of Segregation of Duties
In order to maintain good internal controls around your business’ cash, if people other than the business owner are involved in your business bill payment, you need to have different people touching each part of the process:
- Authorizing – the signing of checks and approval of all payments
- Bookkeeping – recording the bill payment transactions in your accounting software
- Custody – the possession of blank checks
You can see in our description of the typical scenario, the bookkeeper had the ability to initiate and sign checks (authorizing), the bookkeeper did the bookkeeping that allows this person to cover his or her tracks, and the bookkeeper held custody of the checks. This is a perfect recipe for embezzlement and small businesses experience more embezzlement than other businesses.
Why? Because they literally don’t have the staff available to segregate these duties. Most small businesses are lucky to have one person on their accounting staff, let alone three.
The great news is that you can accomplish all this with no one on your accounting staff. What!!? The process is so slick that you can outsource your business bill payment while still maintaining perfect control.
Click here to read more about the benefits of outsourcing your accounting.
Now, we don’t own any of the apps we tout for this service, so we aren’t trying to sound like a commercial for them, but picture this:
While vacationing in Cabo, you receive a notification on your phone letting you know you have bills to approve. You pull the app up on your phone and see the bills queued up for payment. Each bill has associated PDF’s, amounts, and vendor information. You review, click the approve button if you agree, or you make a note for your accountant to investigate something that doesn’t look right to you. Then, approved bills will be initiated for payment. This is done by either ACH transfer or the app pulls funds from your bank and prepares and sends a check to your vendor. You literally only had to approve the payment. And NOTHING could be paid without your approval, so you never lost control of the process. Only now you can do it from anywhere with only moments of your time.
Imagine having a perfect history of all bills you paid, along with the digital PDF’s of original documentation. And you’ll have the ability to see whether your vendor has received payments. What if this all happened with almost no effort on your part? Oh, and your accounting software is automatically updated with all activity. Now ONE person, either an internal bookkeeper or an outsourced solution (like us) can manage all the hassle for you without you sacrificing ANY controls. Your ABC’s of segregation of duties will be covered:
- You will be doing the authorizing
- The bookkeeping will automatically be updated (your bookkeeper can oversee the accuracy)
- And you don’t need to worry about anyone having custody of blank checks
I wish that LedgerGurus was the magic pill solution for bill payment. While we can certainly be part of the solution, the beauty lies in business bill payment software tools. Our favorite tools accomplish what we have mentioned are Bill.com, Plooto, or Veem. We will review and compare these tools in blogs to come.