Is Your Business Protected From Fraud?

Can your business survive a $200,000 
embezzlement or other fraud scheme?  What if1)      Education:  Educate yourself and your
that scheme was spread out over 10 or 15employees.  You can do this in house or have a
years?  Would you notice? Can your businessfraud specialist come in and provide the training
survive a $200,000 embezzlement or other fraudfor you.
scheme?  What if that scheme was spread out2)      Internal Control Review:  It is critical
over 10 or 15 years?  Would you notice?that all businesses have the proper internal
 controls relative to their size.  Depending upon
Denise, a $35K a year bookkeeper, for a smallthe size of your company, you may not be able
trucking company in Alabama is facing severalto segregate all of the duties, but you should
years in prison for embezzling over $550,000segregate as much as possible.
from the company.  What did Denise do with all3)      Cash Reviews/Reconciliations:  It is
this money?  She spent it on cosmetic surgery,important that cash is reviewed and bank
new cars, luxury vacations, and jewelry.  Shestatements are reconciled by a party that is not
was living the high life.   involved in the other aspects of the accounting
 process.
I am sure most of us remember the name Gus4)      Pre-screen Employees:  Because of
Gorman.  He was the character played bythe perceived cost and time involved, many small
Richard Pryor in Superman III.  How did he getbusinesses do not properly screen employees
caught?  Well, he was stupid.  He showed up toprior to hiring them.    This could include
work in a new Ferrari.  Unfortunately, mostchecking work references, criminal records, credit
fraudsters do not give themselves up like this andreports, drug screening or other screening
many employers may not even notice.procedures.
 5)      Balance Trust properly.  Ronald
Denise got caught not because of the huge sumsReagan called it, “Trust, But Verify.”  Mark
of money that she was wiring out of theTwain said, “Trust everybody, but make sure
company account into her own, but because sheyou cut the cards.” 
changed her annual salary from $35K to $38K. 6)      Seek Professional Assistance.  As
When the owner of the company noticed thisyour company grows make sure that you setup
small discrepancy, it was the beginning of anthe proper controls to safeguard yourself.  If you
investigation that kept growing and growing. are unsure about how to do this, consult with a
 professional.
Like this trucking company, most small businesses 
lack fundamental controls to prevent and detectThere are two things that must exist for an
fraud.  Denise was responsible for all of theemployee to be driven to commit fraud —
accounting and bookkeeping functions except themotive and opportunity.  As business owners, we
physical signing of checks.   Denise wouldmust set up a proper system of internal controls
periodically wire funds from the company’sto limit the opportunity as much as possible.  
account to her own account.  When the bank 
statements came, she would reconcile them,Motive is difficult to set controls around. 
burying the wire transfers into an expenseAccording to legend, there was a loyal
account and then destroying the evidencebookkeeper that has been with a Company a
— the bank statements.  Since the ownernumber of years.  He requested a $100 per
did not review the bank statements — hemonth raise and it was denied.  The bookkeeper
was none the wiser.methodically stole from the Company for the
 next 20 years, until he retired.  His replacement
What are some steps that you can take todiscovered an amazing fact.  The retired
prevent fraud in your business?bookkeeper had pilfered exactly $100 a month.