Small business owners often wear many hats but at some point, the need to scale prompts the need to delegate certain roles and functions. Not every entrepreneur or business owner is a financial wizard, and the accounting functions within the business often are the first things to get moved off the owner’s plate. But with that comes inherent risk.
Small businesses typically have a much higher rate of being affected by fraud than large organizations which have more resources to maintain levels of administrative protection and technological securities. Small departments often have little oversight and informal practices can make fraud more difficult to identify.
Today, let’s take a look at where small businesses are most at risk and what steps taken now can help avoid potential employee abuse or fraud.
Get a Second Pair of Eyes on Your Books
Make sure no single employee has too much control. Business owners should create segregated functions in creating invoices, managing cash, paying vendors and tracking transactions. This limits the opportunity and ability to misappropriate funds. In addition, implement a well-defined internal controls policy that will force employees to operate under a system of checks and balances. With separation of duties and measures of approval in place, business owners are less vulnerable to fraud.
Make Technology a Resource
Regardless of what technology you use, the ability to collect and analyze data is critical to identifying patterns and anomalies that can flag potential fraud. Electronic bank statements are hard to manipulate and should be reviewed frequently looking for out of order checks, unknown recipients or anomalous amounts. With WolfePak accounting software, the leading oil and gas accounting software we use for our clients, creating and defining triggering alerts is a good first line of defense against deterring fraud.
Work With a Professional External Team
Outsourced back office accounting teams consist of highly trained and experienced staff. An impartial third-party will ask the tough questions and shed light on discrepancies. Like many outsourced financial teams, we have a deep commitment to financial ethics and business best practices. We not only take care of bookkeeping needs for your business; we add a strong level of administrative oversight and provide a fresh set of eyes reviewing your data.
Planning for fraud prevention shouldn’t overwhelm a business owner and consume all of their time with what-ifs. Our team works under clear separation of duties, preserves strict routing and approval processes and procedures and will reconcile your cash to ensure that you keep every dollar you earn. With your time at a premium, you can rest knowing that your information and financial well-being is in good hands. Want to continue the conversation? Contact us today.