It can be a scary world out there. Too often we hear stories of dishonest people that steal from the unsuspecting and trusting. How can you protect your business from being a headline in the local paper or, let's be honest here, the local paper’s website?
It's not just about trusting the right people; it's about being aware. As the old adage goes: trust, but verify. Hire employees that you trust, but also make sure that you are setting them up for success. This requires removing the temptation or possibility of fraud.
You can protect yourself by being proactive. The fact that you are here, reading about ways to foil fraud already puts you ahead of the crowd.
Here are 3 relatively easy steps you can take to help ensure your business is in good hands.
Attach documentation
This is a good practice to have no matter the specific reason. Your tax professional and the IRS will thank you. Which means that in the long run you will thank yourself. Ensure that all transactions have supporting documentation; including receipts, invoices, bills, checks, expense reports, etc.
This helps provide proof that each transaction is genuine, necessary, and, most importantly, traceable. Without this step, your business is susceptible to fraud through false transactions.
At this point in human history, we’re as close to paperless as we’ve ever been and we get closer everyday. This is actually making it easier to document all your expenses and income.
You can get most documentation (like invoices, receipts, and bills) sent directly to your email. And if you can’t, you’ve most likely got a tiny super-computer in your pocket that can take an excellent quality picture.
Then it’s as simple as creating a system to share those documents with your bookkeeping software. And, as with everything, there’s an app for that! Or to be more accurate there are dozens of apps for that! Find one you like and commit to using it.
Review your bank statements
Review your bank statements at least once a month!!
Sorry to yell, but this ish is important. You, as the business owner, need to have at least a rough idea of what your accounts look like so you can recognize any weirdness going on quickly.
Unless you are some sort of savant it's unlikely that you'll be able to keep an accurate, running tally in your head of all the transactions in your business accounts. As such, take the time every week to look over your statements. Get a good feel for what it is your normal. Then look for anything that is odd or out of place.
Additionally, be sure to periodically verify your payments. It is a common type of fraud to set-up a fake vendor/supplier and process payments for “products” that don’t exist. Double-check that you recognize where your money is going and that you are clearly getting something in return. This ties closely in with the above process of documenting all transactions.
Separate duties
It can be tempting to lean on one person for all financial duties within your company. But when there is only one person ruling the land, fraud can go undetected for years. Years! This can equal millions of dollars lost and the end of your business as you know it.
The separation of duties is a pretty simple concept. There should never be just a single person that sees and processes your financial data. You would be giving that sole soul the ability to manipulate the data in order to line their own pockets.
The person paying the bills should not be the one that signs the checks. The person making bank deposits should not be recording the transactions. Your CPA should be separate from your bookkeeper, so they can act as checks on each other. The more people involved in the process, the less likely fraud can occur.
That’s it! Just 3 steps on the journey to protect your business from financial fraud.
I know that these procedures may seem unnecessary, or like a waste of time. Like just one more thing in a never-ending, and ever-expanding, list of things to do. But, I assure you, they are worth taking seriously.
Continue to do research. Always be aware of what is going on in your business finances. As they say, forewarned is forearmed.