Do you know what it is like to sign hundreds of checks a week?
It sucks.
I know this from experience. When we started, 13 years ago, checks were the way most things were paid in Panama. My partner and I signed a ton of them every week.
The logic behind us personally signing the checks was that we “had control”. No one could steal from us. We controlled the cash. But when the third pile of 150 checks arrived on my desk by Wednesday, do you think I was paying much attention to what I was signing? Considering I did not operate the business, was there any way for me to know how many hours each of our 300 employees worked and every service one of our providers provided?
You see, approving the payment provided the illusion of control. Which is even worse than no control at all.
The illusion of control makes us think we are protected so we move on to focus on other things without dealing with the problem. Acknowledging our lack of control causes fear, which in turn leads to facing the problem and the creation of processes to resolve it.
What did we do?
We delegated the signing of all checks and approval of all wires above a certain dollar amount while implementing cash controls for our companies.
Here is how we did it:
• 80/20 analysis of the number of checks and amount paid per check to determine at what dollar amount to set the max delegated signing limit.
• Establish a dual signature system with the CEO and someone else from management (not accounting). My Partner and I remained as secondary signatures for all checks above the established max amount.
• Hire an internal auditor to spot-check providers, payroll, and cash closings as these areas are where embezzlement is most likely to occur.
At the end of this process, we accomplished two important things. First, we created a well-thought-out process for controlling our cash and auditing our weak spots. Second, we no longer had to sign a stack of checks each week!