It seems like every week there’s another story about a small business owner who’s been ripped off by someone they trusted with their hard earned cash. Just last week, my plumber said he was probably going to file for bankruptcy because his trusted office manager took off with $60k of the company’s funds.
Red alert folks!
You must have controls in place in your business to protect what you have worked so hard to achieve. Yes, it can happen to you and your business will suffer for it. Here’s proof.
The Association of Certified Fraud Examiners (ACFE) survey conducted earlier this year reported that more than half (55.4 percent) of respondents said the level of fraud has slightly or significantly increased in the previous 12 months compared to the level of fraud they investigated or observed in years prior. Additionally, about half (49.1 percent) of respondents cited increased financial pressure as the biggest factor contributing to the increase in fraud, compared to increased opportunity (27.1 percent) and increased rationalization (23.7 percent). There’s no time like the present to make sure you are protected.
Here are six things you can do to safeguard your cash flow.
1. Hire properly — Yes, I know your niece (nephew, neighbor, friend’s husband or wife, trusted colleague, etc.) is someone who you’ve known for a good long time. They are someone you trust. But that doesn’t mean you can skip the steps to make sure they are a good fit for your business. No matter who you are hiring, you need to conduct a background check to ensure there are no surprises. And you need to conduct an interview to confirm their values are the kind you want demonstrated in your business.
2. Spread the wealth (so to speak!) — Responsibilities for handling financial transactions in your business should never be assigned to just one person. You should never allow only one person to perform the task of recording and authorizing incoming and outgoing transactions. At least two people should share this responsibility. And by all means make sure that this person isn’t the only one with signature authority.
3. Check and balance — Audits should be commonplace in your business. At least once per quarter there should be a scheduled audit of your financial transactions. Plus a surprise audit on a regular basis will keep everyone on their toes too. Internal audits are fine as long as they’re not conducted by the people who process your financial transactions, but you’ll want at least one audit per year conducted by an outside party.
4. Open communication — Your company culture should foster an environment that makes it easy for staff to raise issues if they see them. No one wants to be a tattletale and often people won’t report what they see because they are afraid of what the repercussions might be. Give them a safe and anonymous way to report things that they think are not quite right. They could save you thousands!
5. Take a break — Require everyone in your company to take a vacation of at least a week. Often fraudsters will avoid a vacation like the plague because of their fear that their actions will be uncovered. Don’t let tasks sit idle while they are gone. That won’t help protect your business from fraud if everything is waiting for the same person when they return to work.
6. Model integrity — Trustworthy people work for trustworthy employers. If you like to bend the rules, you are implicitly giving your staff permission to do the same. Just don’t do it. Be the model they want to emulate. Don’t lose your business because one of your staff decided to help themselves to your profits. Take the time to implement proper financial controls and you’ll sleep a lot better at night.
This article was previously published at the OPEN Forum and is republished here with permission.