Loss prevention measures to reduce your liability
By Marcia Wade Talbert s Post
Since the beginning of the recession not only has
fraudulent activity increased, but the amount
of money lost to fraud has increased as well.
U.S. businesses lose 7% of annual revenue,
equaling $994 billion, to fraud, but small businesses
are even more vulnerable, according to
a report from the Association of
Certified Fraud Examiners.
Small businesses suffered both
a greater percentage of frauds (38%)
and a higher median loss ($200,000) compared
with companies that have 100 to 10,000 employees
that only suffered losses between
$116,000 and $176,000, according to the report.
Between the recession and loss due to fraud,
small business owners are under even
more pressure to stay profitable
and stay in business. Lawyer, accountant,
and identity theft expert Sonya Smith-Valentine
lays out eight steps that small business owners
should take to keep their assets
safe from in-house thieves.
Keep important items locked up. Make employees
who have access to sensitive information
lock office doors and file cabinets
at the end of the workday.
Keep the mailbox locked and limit
the keys to the mailbox.
Make sure all computers have
automatic password protection
and instruct users to log off when
they step away from their computers.
Put passwords on your bank accounts
so that only specific people
can order new checks.
Check employee references.
check on employees, and as your
business grows, hire bonded bookkeepers.
Even get background information
from building management about
cleaning crews that have access to your offices.
check their credit report to learn about
their debts. "If their credit is really jacked up
and they are really hard-pressed for money,
they might not be the person you want,"
Sign your own checks. If one person is doing
all the bookkeeping they might make payouts
to companies that you haven't
done business with.
They may set up a dummy billing system
to make it seem like you received
a bill for services and they are
just paying the bill.
If you sign checks yourself, you are more
inclined to pay attention to where
the money is going, and employees are
also less likely to embezzle,
If the owner isn't available to sign the checks,
then require the signatures
of two different employees on checks.
Separate the responsibilities
of accounts payable employees.
Make sure the person who is paying
the bills (i.e. signing checks) is different
from the person who is logging
the information into the computer.
When you split the two job responsibilities
it becomes harder to manipulate the data,
says Smith-Valentine. Also, don't allow
the data entry employee access
to the mail. This will reduce
the data entry clerk's ability
to steal a check and cover it up.
Perform random audits of vendors
and clients. Let your staff know that
once every six months you will choose
a business that your company does
business with and randomly audit it.
Randomly choose checks from
your bank statements, find out who
the checks were made out to,
and then audit that company.
Consider hiring an outside accounting firm
to do this; it will put the employees
on notice that there are people
other than you watching them.
Encourage employee watchdogs. Implement
a process for employees to
anonymously report abuse and fraud.
Also let them know that they could
be rewarded if information
they provide leads to the arrest of an offender.
Purchase employee dishonesty
Taking time to detect fraud and
clean up the aftermath is time
you could be using to run your business.
You can purchase inexpensive
insurance plans to help defer some
of the costs that occur as
a result of fraud or embezzlement.
Encourage employees to take
vacation time. A lot of small business owners
are happy when their employees work
as much as possible. But
the embezzling employee will
never take off time. They come in early,
stay late, and they always want
to discourage you from looking up
information on your own, says Smith-Valentine.
"If something strange is going on,
it is probably going to pop up
while they are gone."
Fraud Awareness Week
Sent from Kigali, Rwanda