How can I prevent fraud at my business?



Top Ten List of Simple Fixes That can save you thousands of dollars and protect you from hidden liabilities.

1. “Don’t let one employee do all the accounting and bookkeeping.”

Because of their size, many small businesses have one person that always handles bookkeeping functions like:

  • client receivables
  • processing client payments
  • paying invoices
  • managing petty cash
  • recording functions in the accounting system

This makes it easy for cases of fraud to go unnoticed. Your company should have at least two people handling these functions – with accounting and cash-handling separated. You might also suggest that your firm acts as a virtual CFO to provide extra oversight.

2. “Make sure you know your employees really well.”

It might seem like an obvious fraud prevention tip, but you need to stress the importance of credit card security. Owners/ shareholders must pay heed to employee use of credit cards most fraud can be found when an employee mix business and personal accounts for purchases when it’s convenient to do so. That can result in costly errors and even on a personal level the owner if using a credit card inappropriately can cause themselves tax fines or penalties from an IRS audit. It's pretty typical this is the first place the IRS likes to dig into.

Separating accounts will makes it easier to record business expenses. Protect credit card information and to use secure, online bill payment services wherever possible.

3. “Maintain robust internal controls and processes”

  • restricting employee access to financial account data
  • limiting access to inventory or stock.
  • establishing multi-person sign-off for:
  • expense claims
  • overtime
  • check writing
  • other accounting or payroll functions
  • using audit logs or audit trails to track and trace all financial transactions
  • Modern accounting software logs user activity, allowing yourself and accountants to identify suspicious activity.

4. “Watch your business bank accounts like a HAWK.”

Of all the fraud prevention tips, this one’s become really easy to implement. Online banking makes it quick and painless to check account activity whenever you like. It’s worth doing, making sure that paper-based statements haven’t been manipulated.

The key items to look for are:

  • missing or out-of-order checks
  • unknown payment recipients
  • payments made to unrecognized businesses or personal accounts
  • Simply letting staff know that you’re reviewing account activity can help prevent fraud.

5. “Make sure you audit high-risk areas often.”

Business can benefit from auditing areas of their business that deals in:

  • cash
  • refunds
  • product returns
  • inventory management
  • accounting and bookkeeping functions
  • Employees should be told that audits will take place, but there shouldn’t be a schedule. By making the audits random, your more likely to dig out fraud.

6. “Train your employees to prevent fraud.”

It’s essential that employees in fraud-prone areas of small businesses are taught how to:

  • identify fraud
  • prevent fraud
  • report suspicious behavior by co-workers and customers
  • Help educate staff about some of the common warning signs. Set up an anonymous reporting system, too. It’ll make it easier for customers and employees to share information about suspicious activity.

Create an official code of ethics to demonstrate that fraud won’t be tolerated. This will also help reinforce that fraud is a crime, which is important. People sometimes kid themselves that unethical behavior is victimless when they’re taking paper and pens home from the supply cabinet!  Have you ever noticed an increase in your office supply expenses 30- days after the beginning of a school year?


7. “Know who your business partners are”

You should record necessary information about the people your doing business with. This should include:

  • physical address
  • contact names and phone numbers (at least two)
  • mutual business relationships or references that can be checked

For further peace of mind, you should look up the businesses your employees are dealing on occasion to check: they’re a legitimate businesses or cleaning services etc.

  • who the owners are
  • how long they’ve been in business

8. “Check into every case – no matter how small.”

Look into reports or suspicions, no matter how small or unlikely they seem. It’s important not to:

  • become complacent with long-serving staff
  • be distracted by the daily pressures of running a business
  • The earlier fraud is detected, the better the result for the business and the culprit.

9. “Get expert help if things don’t add up.”

Call us at ZABEL to help you establish a new process around fraud.

Fraud prevention starts with a conversation

Small business owners consistently underestimate the threat of fraud – yet studies show this is where you face the greatest risk. If you as an business owner feel awkward about introducing fraud prevention measures with trusted staff – you can blame us "the bean counters" at Zabel, telling your staff it’s all your accountants idea.

*Dividing responsibilities and getting two sets of eyes on the books – also help with quality control. by using us to help with bank reconciliations trial balance verifications and month end closes will greatly reduce your risks. 

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