|Tips to Prevent Internal Business Fraud|
|Maintain confidentiality. Do not place specific account or routing numbers on your Web sites. Have your customers call you for wiring instructions.|
Set clear standards. From the beginning, establish clear standards including an appropriate example and ethical tone. An employee manual lays down the principles and values for your organization, and in a small organization, it levels the playing field to keep rules from becoming arbitrary. If you ever need to appear in court due to an employee's dismissal, the manual can be a reference to explain what actions warrant dismissal.
Check employee references. When hiring anyone, check references and perform background checks of employment, credit, licensing and criminal history. The benefits far outweigh the cost. For example, rethink hiring a bookkeeper with bad credit since the pressure of crippling financial obligations could turn an otherwise honest person into a thief.
Secure your organization. Closely guard and monitor your checks. Use pre-numbered checks to help audit for missing checks and readily spot checks clearing out of sequence. Keep all checks under lock and key, and avoid distributing keys. You should also have a voided check procedure, never sign blank checks and review disbursements regularly. Scan for, then examine, checks made out to unfamiliar suppliers, checks made out to cash, missing check numbers or unsequential checks. Utilizing account information solutions, such as Online Banking and Positive Pay, can also help minimize potential check fraud. Finally, train your staff in your security systems and disciplinary policies/procedures.
Safeguard payroll. Review every payroll check personally. Though time-consuming, it can effectively ensure employees are paid appropriately, which may be a bigger concern if you have temporary and part-time staff. You can minimize time spent writing and reviewing checks by using a disbursement tool like Direct Deposit of Payroll to help automate the process. Also, maintain certain duties separately whenever possible, even in a small business. The person who “cuts” the checks should not be the person with authority to sign. The person opening the mail shouldn't record receivables and reconcile accounts.
Control who reviews sensitive documents. You can maintain a separate post office box for receiving bank statements, customer receipts or any other sensitive documents to help eliminate the chance someone will intercept mail in order to steal or to cover up an earlier theft. Another alternative is to receive e-statements through online banking and give yourself sole access.
Consider independent review. Since theft often occurs when bookkeeping is sloppy and unsupervised, your organization's account reconciliations and general ledger balances should be reviewed independently by a person removed from daily transactions. Familiarize that person with your bookkeeping/record system to permit spot checks and reviews to better safeguard your organization.
Consider hiring a CPA. CPAs can be hired to take on some of the independent review function or to provide all required bookkeeping services. Be aware that a CPA will not necessarily uncover fraud but will enhance the control environment. CPAs can review monthly finances with the owner, helping to spot trends indicative of fraud or to find opportunities to enhance profitability.
Consider annual audits. Although not always required, an annual audit will give an opportunity for someone removed from daily operations to provide an overall review of your organization's risk. An audit also tends to motivate bookkeeping-related staff to keep things honest because they won't always know what questions an auditor may ask or what documents an auditor may request to review.
Tips regarding internal fraud have been adapted from the AICPA's (American Institute of Certified Public Assistants) Web site.
And check out more identity theft resources.
The Security and Privacy information contained on the Virginia Commerce Bank public Web site is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You should consult an appropriate professional for specific advice tailored to your situation.