Could You Be A Victim Of Small Business Fraud?

Did you know that Small Businesses are especially vulnerable to fraud?

In fact, some companies have gone out of business because of employee theft.

A CPA friend of mine was telling me about one of his clients who had lost almost
a half a million dollars because his Bookkeeper was forging checks. The Bookkeeper's
explanation for her newfound wealth was that she was very lucky at the casinos.

In later posts to this blog, I will discuss how employees steal in much more detail.
However, for right now, I will give you a few quick tips as to how you can reduce your
chances of being a victim.

The first and probably most important piece of advice is to segregate duties. Never, ever,ever
let your Bookkeeper control both the custody of the bank account and the record keeping.

In other words, do not let your Bookkeeper write and sign the checks, make the entries in the Accounting software and reconcile the bank accounts. If you do this, you are just asking for trouble.

At a minimum, you should be signing the checks - not the Bookkeeper. In addtion, you should have another employee or your Accountant reconcile the bank account. Even better, would be for you to reconcile the bank account.

Other actions that I would recommend are:

1. Perform background checks on new hires.
2. Have the bank statement sent to your home address so you can review it before anyone else.
3. Review your open Accounts Receivables and Accounts Payable to make sure that nothing
looks suspicious. You should be doing this anyway for Cash Flow purposes ( I will discuss that
in another post).
4. Be curious about improvements in your employee's lifestyle (especially if you have not given
them a raise!)
5. Be suspicious of an employee who never wants to take a vacation or who always comes in
early and leaves late.

You work hard for your money. A small amount of caution on your part will help you keep it.