Money and Accounting
As part of their duty of care, the officers and directors of a corporation and the managers of an LLC are responsible for making sure that the company has sound accounting practices. This includes accounting for all assets that were transferred by the founders into the company and properly recording the income and expenses attributed to the company. The company's accountant should, at a minimum, produce annual financial statements for the company, and these statements should be made available to the shareholders and members.
Never combine or commingle personal funds or expenditures with those of the company. This problem tends to come up with start-up businesses when funds get low. Separating the company's bank account from your personal bank account allows for ease in record keeping and bookkeeping. In addition, it is advisable to put explanations on company checks, along with cash tickets and receipts for each transaction.
Do not use the company bank account for any personal expenses.
Establish separate credit card accounts for the company. If you have to, on occasion, use your personal credit card for a company expense, make a careful record of the expense and seek reimbursement from the company. Document all expenses and require employees to submit detailed expense accounts before receiving reimbursement. Manage any petty cash accounts by requiring written receipts for all withdrawals of cash.
With the help of your accountant, establish a system of checks and balances to ensure the integrity of your accounting practices. For example, in some companies, the person who records expenses and the person who writes the checks for the expenses are separate individuals. In addition, you may want to require two signatures on checks over a certain amount.
