Don'ts which will help;

              26 HASKINS & SELLS April
"Don'ts" Which Will Help
" D O N ' T trust any one with your
money, if you would not have it
stolen," might be a very simple and effec­tive
formula for theft prevention if it
would work. Modern business is con­ducted
on a different basis; hence, other
"don'ts" must be considered.
Generalizations have their value in
eliminating detail. They convey ideas
much more quickly than a mass of
undigested information. But in the
application of principles, details will not
be thrust aside.
The principles of embezzlement pre­vention
have been stated again and again.
They have been presented in general
terms and illustrated by cases. Seldom
has their application been discussed con­cretely,
having in mind the inter-related
bearing of organization, function, ac­counting
system, and control.
The purpose of this article is to present
and discuss some of the simple precautions
of a preventive character with a view to
helping business men to understand more
definitely than in the past what are some
of the chief pitfalls and how they may be
avoided.
As a cardinal principle no one person
should have financial matters entirely in
his grasp, much less control. Furthermore,
the controlling records should be divorced
from the person who handles the funds.
In the usual sequence of business tran­sactions
within a given concern, the pur­chase
of goods follows soon after setting
up the organization, but the sale of goods
produces the first cash received after the
initial cash provision for current purposes.
Thus, one typical situation perhaps may
be visualized best by viewing the work of
a theoretical employe who performs all the
duties of cashier and bookkeeper, con­sidering
the transactions, beginning with
sales, as they bear on the question of cash
irregularities. This situation is by no
means rare, particularly in smaller con­cerns.
Fortunately, however, such situa­tions
probably are decreasing rather than
increasing in number.
For purposes of illustration, let it be
assumed that the "custodian" personally
performs the following duties: prepares
sales invoices and keeps the sales records;
receives all incoming cash (currency and
checks) direct; enters receipts in the cash
book; passes on questions of cash dis­counts
and similar allowances; keeps the
customers' ledger; deposits in bank, checks
and such currency as is not needed for
currency disbursements; makes disburse­ments
in currency and cashes checks, re-cashing
such checks at the bank; prepares
disbursement checks but does not sign
them (the latter an absurd precaution
under the circumstances); enters disburse­ment
checks in the cash book; keeps the
purchase invoice register; foots and bal­ances
cash book; reconciles the bank
balance; keeps the general ledger.
Almost every form of cash irregularity
known would be possible under these Con­ditions.
Abstraction, interception of re­ceipts,
and improper withdrawal of funds
on deposit might be perpetrated with maxi­mum
possibilities of success in attempted
concealment. There is a mixed cash con­dition,
that is to say, no line of demarca­tion
between cash in hand and cash on
deposit. Checks and currency may be
interchanged without any control over the
identity of either. Altogether the situa­tion
is alive with opportunity for one who
is disposed to be irregular.
The remedy for a situation of this kind
may be found in applying certain funda­mental
rules of which many well-organized
business establishments have long since
taken advantage. The first of these is
divorcing from the cashier all records ex­cept
the cash book. The second is estab­lishing
a cash fund of fixed amount out of
which to make small disbursements, using
checks for disbursements whenever pos­sible.
These are the two most important
changes needed to correct a dangerous