Preventing Financial Fraud
Small businesses can be the most vulnerable when it comes to financial fraud because they give a single individual multiple responsibilities with little or no supervision. This is understandable because of the size of their business, but it opens them up to more risk of fraud. To minimize these risks, consider putting in place the following controls:
• Do not give your online banking information to anyone unless you confirm with your bank that it is on a read only basis. Your bookkeeper should not have access to any sort of online bill payer.
• Never have blank signed checks anywhere. This is a common mistake; many business owners leave signed checks with their bookkeeper or staff for the sake of convenience. But it means that checks to unknown payees and in unknown amounts can easily be made out – and the fraud doesn’t even have to forge your signature!
• Never give signing authority on your bank accounts to a bookkeeper. Your bookkeeper can enter transactions and even print the checks, but YOU should always be the signer.
• Be the first person to open and check your bank and credit card statements each month. Look at the payee, signature and endorsement, and question any entry or checks that you don’t recognize. Bookkeepers often go years without being detected simply because they are the only ones who actually watch what goes through the bank accounts.
• Consider having an outside Accountant/Bookkeeper do a random audit or review of your books at least once a year.
Ultimately, the best thing you can do is divide up tasks so no individual handles a financial transaction from start to end. Two pairs of eyes on your books can provide a critical set of checks and balances. If you don’t have the volume or resources to do this, consider outsourcing your bookkeeping to a reputable firm that has put these safeguards in place. Check out their references and make sure they carry the appropriate errors and omissions insurance to cover you against any fraud that may occur.
Written by Shandra Rose of Evergreen Bookkeeping, a small professional company that helps store owners.