05 Oct The Importance of Reconciling the Gift Certificate Liability Account
Employee theft is an unwelcome violation of the trust that we place in the people who work for us. The only thing worse than having it happen is not realizing it is happening until it has been going on for a very long time. Having good internal controls that we utilize and keep up with is the best way to limit how much they can steal and even prevent it in the first place. There are many kinds of controls that help keep various segments of a business in check. One of the most often overlooked controls are the ones around gift certificates and promotions. This is a weak point that employees can take advantage of. Happily this is also one of the easiest areas to reconcile and create controls around. Here is how you can create controls and limit theft in this area.
1. You need to track and measure the sales of new gift cards and certificates. If this is digital you need to be sure that when new credit is issued a payment is required even if that payment is some kind of discount or comp that can be tracked. The process of internal cash controls will also need to be in place as well.
2. You must track the redemption of certificates. More often than not this is tracked as a tender in the point of sale system.
3. At period-end you will pull the balance in the computerized system. The balance of the purchases and redemptions should match the balance at the period-end.
4. Any comp transactions should have notes related to who issued the gift card and why. Whenever possible comp transactions should be limited to manager use only.
These are four very basic things, but they are often overlooked. When these steps are not taken gift certificates and gift cards can be issued by employees either to themselves or to their acquaintances without payment. They then can be redeemed for goods. They can also be used to help steal cash. Employees can use stolen gift cards as a tender when a customer pays cash. The employee can pocket the cash and cover the sale with a gift card. If you are using paper gift certificates, this can be harder to monitor and manage but is not impossible.
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