Fraud Management

FRAUD in Down Economy

Often the small business owner, who knows the category, but not bookkeeping, turns that over to someone with complete trust, never auditing transactions. For example:

o Is the Bookkeeper responsible for payroll? With one or two employees, that is often not an issue – but with more it can be. Make sure that anytime an employee leaves your payroll, that the account is closed. Keeping a payroll account open, just a week longer, and changing the direct deposit account (to another account) is often a simple way to defraud the employer. Get to know your payroll records – intimately.

o Does the bookkeeper have a personal credit card with the same bank as the company credit card? This simple and often innocent coincidence makes it easy for a desperate person (with access, like the bookkeeper) to use funds from the business account to pay the personal account, especially if the owner never really looks closely at the bank transactions. Doctoring those reports can be easily done without any oversight.

o Do you use a signature stamp for business checks? That bad habit sure makes it easier to use a company check to pay a personal bill. You may need to change behavior by destroying a signature stamp, personally sign all checks with invoices attached, and have the bank send all statements to the home address first. Read them, looking for transactions that seem extraordinary, strange, or just “different.”

o Does a trusted employee make bank deposits for you? Are they “running out of time” each day to make a deposit and combine deposits? Might be signs of a problem. Skimming here is easier, especially if there is no internal system for matching register tape receipts with cash. This must be a daily exercise, even when you are not working that day.

If you discover fraud, quietly get a team of people quickly assembled that can help – often the employee is ashamed (the desperate one) and a deal for payback can be worked out to avoid prosecution; however, that option must probably always be on the table.

Copyright ©2009 by P. Griffith Lindell