In this day and age, all companies are susceptible to fraud in one way or another. Small businesses are most vulnerable as they have only a few key people making decisions in limited concentrated positions. Here are some tips that can help you protect your business.
Use sound hiring practices
Make sure to double check references and perform background checks before hiring new employees.
Clearly communicate standards and policies
Establish organizational values, policies and codes of conduct that promote ethical behaviour and reinforce your company’s zero tolerance policy on theft and fraud. Provide staff with an employee manual and have them sign off that they have read and understood company expectations.
Set up a series of checks and balances
Set up a payables system that requires two signatures and have cheques referenced against original invoices before signing. Business cheques should be consecutively numbered and questioned when out of sequence. Review employee disbursements regularly for authenticity. Reconcile statements regularly. Creating strong internal controls negate opportunities and deter behaviour.
Segregate duties
Smaller businesses often have one staff member handling money, inventory or taking care of the accounting work. Enforcing vacation time and cross training are effective deterrents as they increase the potential uncovering fraud. Divide cash duties to ensure that the same employees are not the only ones handling cash. Set up a double-check system that requires two signatures to sign off when handling cash or inventory.
Audits
Look into establishing periodic external audits, specifically in high risk areas where fraud can occur most easily. Have account reconciliations and general ledger balances independently reviewed. Consider conducting an annual audit. This not only provides you will a big picture view of the past year, but also discourages dishonesty and fraud.
Watch for signs
Watch for red flags in employee conduct, such as never taking vacations, exclusive or proprietary behaviour about their work, or unexplained changes in behaviour.
For more information on protecting your business against fraud, contact info@karenjonesconslting.com.
