We had an interesting conversation at our recent Business Development Meeting. Shannon Cain and Cynthia Allen of Cain & Associates presented to us on trends in the forensic accounting industry. They asked how many of us had worked with clients who experienced fraud in their small businesses.
In a room of 25 people, about 80% of us raised our hands.
Fraud can be common, but preventing it is easier than you think. It doesn’t require many resources, but it could save you thousands in the long run. Here are a few ideas from Shannon and Cynthia:
- Implement a hotline. Be it in the form of an anonymous phone line or a secure “suggestion box,” give your employees an outlet to report dishonesty or stealing amongst their coworkers.
- Enforce vacation policies. When a dishonest employee is away from the office and someone covers their workload, any missing information or strange practices are likely to be noticed.
- Implement “surprise audits”. One of the best defenses against employee fraud is the perception of detection. By allowing your CPA to stop in unexpectedly to review a key aspect of financial reporting, whether it’s reviewing monthly bank statements/reconciliations, payroll records, or vendor invoices for proper approvals and authorizations, it mitigates the risk of fraud within your organization.
- Invest in the appropriate amount of fidelity bond coverage. Investing in the proper amount of insurance coverage over employees that have key roles in financial reporting can help recover any losses. It’s also a good tool to find trustworthy employees.
Fraud is scary. Preventing it doesn’t have to be, and we can help. Contact me if you want to talk about how to protect your small business.