Too few staff to split duties: what the owner checks
When a small workshop cannot split every money duty between people, the monthly checks the owner should do instead, and the warning signs to look for.
By Achekam · · 5 min read · For Automotive businesses in South Africa, Nigeria, Kenya
In a three-person workshop, the person who takes the customer's money is often the person who records it, banks it and follows up the accounts that have not paid. The owner knows that is not ideal. Every guide to internal control says the duties should be split. But there is nobody to split them with: the second person is a technician under a bonnet, and the third is the owner, who is out quoting a fleet job.
This is not a failure of the business. It is a fact of its size. The answer is not to pretend the duties are split, but to replace the missing separation with checks the owner does personally, on a fixed timetable, that would expose a problem if one existed. This article sets out what those checks are.
Why full separation is hard in a small workshop
AccountingTools notes that segregation of duties is harder to achieve in a smaller organisation with too few people, and that spreading tasks across too many people can slow processing. In a small workshop, insisting that a second person approve every receipt would stop the counter working.
So the owner has to accept some concentration of duties, and decide how to compensate for it.
Prevent where you can, detect where you cannot
Investopedia explains that internal controls are broadly divided into preventative controls, which aim to stop errors or fraud happening, and detective controls, which are backup procedures to catch items missed by the first line of defence. Its explanation of internal controls walks through both kinds with examples.
A large dealership leans on prevention: one person cannot both raise and approve a payment. A small workshop cannot afford much prevention of that kind, so detection has to carry more of the weight. The owner's review is the detective control. It works because the person doing it is the one person in the business with no reason to hide anything, and because the people doing the daily work know it will happen.
Investopedia also cautions that internal controls provide only reasonable assurance, and can be undermined by management override and by collusion between employees. In a very small business the owner is the management, which is one more reason for the owner to take the review seriously rather than delegate it.
The owner's monthly review
Investopedia identifies reconciliation, comparing one set of data with another, as the most important detective control, with corrective action taken when material differences are found. Almost every check below is a reconciliation of some kind.
1. The bank reconciliation. In Achekam, bank lines are matched by suggestion and a person accepts each match, a bank line not yet in the books becomes a suggested journal that a person approves, and a reconciliation completes only when there is no difference left or every leftover line is explained. Read the explanations. A leftover line explained as "timing" should clear next month; one that is still there three months later needs a better answer.
2. The till reports against the bank. A live X report of an open till and a Z report frozen at cash-up can both be opened as PDFs. Pick a few days at random each month, take the Z reports, and trace the cash and card totals into the bank deposits and card settlements. A day where cash recorded at the till never reached the bank is the single most useful thing this check can find.
3. The general ledger. The general ledger lists every posted line, and the trial balance shows each account for all time, for a period or at a date, and says whether debits equal credits. Scan the month's journals for anything unusual: manual journals to sales or to bad debts, round amounts, entries late in the month to accounts that rarely move.
4. Payments out. Look at every supplier payment above a level you choose and check that the supplier is one you recognise, for parts or services you remember receiving.
Reading the aged debtors
Achekam ages receivables into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. For an owner, this report is not only a collections tool. It is a fraud check.
Look for invoices that should have been paid. A fleet customer that always pays promptly but has one invoice sitting in the 61-90 column; a cash customer showing a balance; a customer that tells you they paid when you phone them. Any of these can be innocent. Each can also be the trace of a payment received and not recorded against the invoice. Phone the customer yourself when something looks odd; it is the quickest way to find out.
Signs that a control has been overridden
Some patterns deserve a closer look, whoever is involved:
- Bank reconciliations that are always done, but always late.
- A staff member who never takes leave and will not let anyone else do the cash-up.
- Credit notes or refunds just after month end, reversing sales that were in the previous month.
- Customers with balances that never seem to age, because payments are applied to the oldest invoice from someone else's money.
- Explanations on reconciliations that are vague and repeated month after month.
None of these proves anything. Together, they tell the owner where to look next.
Making it a habit
The review works only if it happens every month, at about the same time, and if the staff know it happens. Write it down as a short checklist, initial and date each item as you go, and keep the signed checklist with the month's records. If something needs follow-up, write that down too, and check it the following month.
For a broader look at splitting duties in a small business, see segregation of duties and controls for a one-person practice. For the card side of the till check, read recording card payments from the bank terminal.
A small workshop will never have the controls of a large dealership. It can have an owner who looks, regularly and properly, and that is worth a great deal.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
