Here are a few of the warning signs to look for when it comes to identifying and preventing fraud in your business.
Even with the most diligent fraud prevention measures in place, business owners and managers may still find themselves facing the signs of some kind of fraud. Nearly half of small businesses experience some type of bookkeeping fraud, which can lead to serious losses. In order to avoid losses from fraud, it’s important to stay aware of the warning signs that your business may be dealing with some type of fraud. Here are a few of the warning signs to look for when it comes to identifying and preventing fraud in your business.
Access Vs. Oversight
One important thing to consider in your business’s bookkeeping is the ratio of employees who can access finances versus ones conducting financial oversight. One employee should never be responsible for all financial transactions, authorizing payments, and tracking expenses. This can create a security risk, but it can also leave a lot of room for mistakes that can then be difficult to solve. It’s a good idea to have procedures in place that set two pairs of eyes on every financial transaction. This will create a greater sense of accountability in your bookkeeping.
Cash Accounts Not Balancing
However it is that your business handles funds, you should regularly reconcile your cash balances against your sales and expenses. Whether this means cash registers, check deposits, or electronic funds, you’ll want to look for balances that are too low or too high. Keep in mind with low balances that honest mistakes can happen at every level of business, so what seems like an obvious sign of skimming may be easily explained. Check for consistently low or high balances for signs that your business may be dealing with fraud.
Frequent Mistakes or Transactions
As we previously mentioned, mistakes can happen. An employee may make a mistake counting a drawer, or a clerical error can cause an issue with a bank deposit. The key when spotting fraud is to look for a pattern of mistakes that can mean fraud or skimming. Frequent transactions to correct errors should also be carefully considered. Are all these frequent transactions being made unsupervised? Do you have another set of eyes to corroborate and correct mistakes along the way?
A Lack of Checks in Bookkeeping
Finally, the most important sign to look for when it comes to spotting fraud in your business is a lack of checks and balances. Whether you’re dealing with frequent mistakes or unexplained activity, ensuring that there is always a second set of eyes signing off on financial transactions can help to create a system of accountability in your business that prevents fraud and loss long-term. This serves to protect your finances, as well as employees, which will create a greater sense of trust and accountability throughout your business model.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services are aimed at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.