3 Fraud Prevention Strategies for Your Business
Internal theft in business is all too common. Search the internet and you will find many articles about embezzlement by trusted employees.
The good news: There are steps you can take to safeguard yourself and your company without relying on ‘trust’ as a method of prevention.
Reduce the risk of fraud in your business by following these three steps.
- Establish Internal Controls
One of the easiest ways to protect yourself against fraud is to have processes in place so no one person has access to your accounts. Creating a process in which there are at least two signatures or approvals on every check or expenditure can help.
There are electronic systems that can assist you in tracking this approval process and provide tiers of approval. For example, if there is a bill over $5,000, you can require the head of the department to approve it, in addition to the two other approvers.
You should also perform unannounced audits on the system. When you do this, you can catch issues early or deter them entirely—it’s harder to embezzle money when the system is reviewed unexpectedly.
One of the biggest issues we encounter involves sharing usernames and passwords. Please do not give anyone full access to your accounts. This includes bank accounts, credit cards, and your accounting system. There are permission levels for all these accounts to keep you and your company safe.
- Establish Separation of Duties
This principle is the basis of a solid internal control system. It involves dividing the responsibility of a process between two or more people.
For example, the person who collects checks from clients should not be the same person who deposits those checks. The person who reconciles the bank statement should not be the same person who approves payments. And the person who runs payroll should not be on payroll (they should not be paying themselves).
- Utilize Outsourcing
One of the most effective ways to reduce your risk of fraud is to outsource your bookkeeping and accounting to an experienced company. This provider will be able to create internal controls and have a road map for separation of duties, which will eliminate the risks involved. They will have processes in place to review your transactions, ask questions, and ensure oversight on others in the accounting system.
Implementing fraud prevention strategies now will not only help you control the situation, but it will also save you time and money in the future.