When it comes to fraud, the old adage about a small amount of prevention being worth a large amount of cure is spot on. Investing in fraud prevention methods can be more cost-effective than spending time and money on cleanup after a fraud has been detected. Here are suggestions to help prevent fraud in two key areas.
Tips for Preventing Business Fraud
Payroll. If your company uses payroll software, set up the internal control features to keep master hourly rates, hours worked, and bank direct deposit information safe. Pull timecards periodically to verify that payroll checks are being issued to actual employees, not “ghosts.” (Ghost employees are workers who don’t actually work for your company, such as former employees who continue to receive paychecks.) Monitor your expense accounts and financial statements. Higher-than-budgeted payroll costs are a potential tip-off to payroll fraud.
Accounts payable. Establish a very clear segregation of duties between the employees who receive goods or authorize services, and the employees who process the payments for those goods and services. Having more than one person complete a task makes fraud more difficult. Take time to get to know your vendors. You want to be sure the companies you’re paying are real, not fictitious entities. Monitoring the number of invoices you receive from individual vendors, as well as the average payment amounts for specific vendors, can alert you to suspicious payments.
One more tip: Communication about what is and is not acceptable behavior is also a prevention method. Emphasize to your employees, your vendors, and your clients that unethical behavior and practices are not acceptable, and clearly state the consequences.
Whatever the size of your business, fraud can impact your bottom line. If you have questions about implementing fraud prevention strategies, please contact us at Cisco & Co CPAs. We have suggestions and tips that can help keep your business assets safe.