Wisconsin Lawyer: A Partner Needs to Be Actively Involved in the Payment Process :

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    A Partner Needs to Be Actively Involved in the Payment Process 

    There are two inexpensive and simple steps that can be taken to provide more oversight for the disbursement function at a law office. First, a partner needs to be actively involved in the process of issuing checks and payments.

    Tracy L. Coenen

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 81, No. 12, December 2008

    by Tracy L. Coenen

    There are two inexpensive and simple steps that can be taken to provide more oversight for the disbursement function at a law office. First, a partner needs to be actively involved in the process of issuing checks and payments.

    It’s not enough to simply glance at checks to vendors and immediately sign them. Before any check is signed or sent out, it should be compared to an invoice, credit card statement, or other documentation that will help verify the legitimacy of the payment. This reduces the risk that an employee pays a personal credit card with company funds or otherwise improperly issues a payment from the firm’s checking account.

    The second step to increase oversight at a law firm is involving at least one other person in some of the functions. If the office manager is disbursing funds, another employee should do the bank reconciliation. This provides a natural checks-and-balances situation, in which the second employee is verifying the work of the office manager.

    Tracy L. Coenen

    Tracy L. Coenen, CPA, MBA, CFE, is the principal of Sequence Inc., a nationwide forensic accounting and fraud investigation service with offices in Milwaukee and Chicago.

    If the office manager is responsible for preparing payroll checks or reporting the payroll information to a payroll service or preparation, another trusted employee should examine the payroll records before the paychecks are distributed. The second employee should verify that only legitimate employees are being paid and that proper pay rates and hours are recorded.

    There is a side benefit to having another employee involved in these accounting functions: If the office manager is unexpectedly absent for an extended period, there is at least one other employee who has some familiarity with the financial matters.

    In addition to these two key components of fraud prevention, it’s also important for the managing partner to be actively involved in the firm’s finances. This means doing spot checks of accounts, examining documentation, and verifying the flow of funds. 

    It’s important that unusual things like missing or altered documentation, unexplained changes in revenues or expenses, and payments to questionable third parties be closely examined. Things like these can be indicators of fraud, so they should be eyed carefully.

    From a management standpoint, it’s always a good idea for the head of the firm to have a good working knowledge of the numbers. From a fraud prevention standpoint, being involved with the finances is a very effective way to stop dishonest employees. If an employee knows management is actively involved with the numbers and regularly looks at financial documentation, there is less of a chance that she or he will attempt to steal from the firm.

     




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