Set up Important Internal Controls
Separate duties of receiving funds, disbursing funds, writing checks, signing checks, and the reconciling of bank accounts. Having one employee responsible for all cash related functions makes small businesses vulnerable to fraud.
Monthly bank statements should be delivered unopened to the business owner, who should immediately review all transactions. Owners should look for signatures or endorsements that could be forged, missing check numbers, out of order checks, and verify checks cleared for the intended amount.
Institute background checks on new employees and notify job applicants that their background will be reviewed.
Studies show that employees that are well-treated and adequately paid are less likely to commit occupational fraud that those who don’t.
Employees who hold grudges against their employers- justified or not- are more likely to turn to occupational fraud and abuse.
Promote vacation: insist employees use their vacation time. Use that time to review books for discrepancies.
Encourage anonymous reporting should employees witness or hear of suspicious behaviors.
Gain valuable information from simply asking questions in a non-threating, non-accusatory manner.
Conduct internal and external audits, especially a “Fraud audit” instead of a general audit, if you suspect fraud.
Utilize your CPA firm to set up your accounting software. There are many helpful features that can be used.
Password protect personnel and vendor files.
Make sure there is an audit trail of all changes made to vendor master files, including an identification of those who made the changes to the master file.