Today is our final installment on internal controls and fraud series. Last week we took some time to look at a few different ways that fraud could be conducted on your business. This week we are going to look at a few ways you can proactively put in controls to help reduce the potential threat of fraud. There is no sure-fire way to tell if someone will or will not commit fraud against your business. Taking a proactive stance about internal controls is your best defense. If you’re not sure how to begin reach out to a professional who can help you create controls that are specific to your own business.
Here are a few ideas on how you can establish controls at your company:
Complete a background check on new employees – before hiring any employees perform a background check on them. Call references and do your due diligence to give yourself information you need to make a sound hiring decision. Make sure to check the laws in your area regarding what is and isn’t legal before performing a background check.
Install system security on your computers and network and educate your team on email and internet security. Work with a computer professional to know how to spot and stop threats to your businesses’ network. Keep your network secure.
Separation of Duties -is key to preventing fraud at your company. Separation of duties means one person doesn’t have control of all aspects of a transaction. For example, if you receive a shipment; have one person accept the shipment, one person validates it, and another enters into the system. For your accounting team have more than one person involved. As an example, one person may be responsible for entering a transaction in the accounting system, and another person will complete the monthly reconciliation. By having multiple people involved in each transaction, they would need to work together to commit fraud.
Nightly reconciliation – when cash is involved have a process in place to validate the amount of cash. Each day, know how much cash you have on hand, and how much you brought in and gave out. By having a daily process, this will limit the ability for employees to walk off with cash since you will account for it at the end of the day.
Limit the number of people who have access to cash, inventory, or the accounting systems. Know who has access and when they have access. Have a system in place to identify employees as they access various systems.
Check and validate all invoices that come into your company paying. Ensure you are paying only for services and goods that you have received. When shipments arrive, ensure you are receiving the right amount of goods. Raise a red flag for anything that doesn’t seem to be right before paying.
Stay educated on the latest happenings on both the controls side and the fraud side. Be aware of potential scams and educate your employees so they can be aware. Fraud can happen to anyone. Your best defense is to be proactive and keep a close eye on your operations. Take time to regularly review your financials, so that you can easily spot any changes that seem out of the ordinary. Work with professionals to help you implement the best procedures for your business.
This concludes our brief series on internal controls and fraud. The purpose of this series is to get you thinking about the controls that are in place for your business and potential threats that could happen to your business. Keep in mind, there are many ways fraud can be committed and prevented that are not mentioned in this series. Always do your research and work with professionals to safeguard your company.
See you Next week!
**We hope you enjoyed our blog. Please note that the intent of this blog is to provide general information and should not be construed as financial, financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.