Think your funds are safe? Think again.
If you’re in business, there’s an increasing chance that you’re being defrauded. It stands to reason: in tough times, people become desperate. And in times like these any loss can cripple a small business.
In fact, a recent report by the Association of Certified Fraud Examiners revealed that more than half of the experts surveyed believe fraud has increased during the recession — and, the report notes, there are always the unreported or not-yet-uncovered incidents.
The average fraud-related loss in the U.S. comes to about 7% of revenues — and small businesses suffer more. Can your business afford a loss?
There are some basic steps that every business should take to protect against employee embezzlement and other types of fraud.
One of the most important things you can do is establish checks and balances by separating duties. This simply means having different people or departments keep an eye on each other. More oversight is like having a watchdog — you hope he never barks but, if he does, the warning is invaluable. For example:
- On the cash receipts side, the same person shouldn’t be responsible for both recieving and depositing money. If they were, how would you know every check got to the bank? A cash receipts log should be maintained by someone independent of the person who records receipts in your books and records.
- The person who initiates a purchase shouldn’t have check signing authority. If they did, how could you know they’re not “purchasing” fictional goods and services from a friend or relative?
Read more tips for avoiding fraud.
It’s easy to say “I trust my employees, they’ve been with me forever.” But even before the current economic pressures, many of the frauds our professionals uncovered were committed by long-term employees the business owner would have called loyal friends. Making sure you have adequate controls in place is only smart business.
Nick Tootle is an audit partner at Kaufman, Rossin & Co., one of the top accounting firms in the Southeast. He can be reached at ntootle@kaufmanrossin.com.
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