Fraud is something that most small business owners don’t like to think about and often think, “That can’t happen to me.” However, as we’ve previously discussed, it happens far more often than business owners would like to admit. In small businesses, fraud is the result of lack or absence of controls, which are exploited by an employee. A key process that should be examined as part of a fraud review is the process of how bills are approved and paid. While SMB’s often don’t have proper controls in place, this can easily be addressed by implementing basic controls, which are easy to execute.
The first thing a business should establish is a separation between the person(s) who approves a bill and the person(s) who pays bills. This very basic practice is often defaulted to giving these responsibilities to one person, who is often times, not the owner. The owner or accounting manager may feel like they are streamlining the process but fail to see the long-term exposure to fraud.
When this happens, the person overseeing this work is also put in a bad position with complete control over the process. With one person approving and paying bills, and the absence of checks and balances, there are numerous ways to syphon funds from the company.
So how do you prevent this situation from happening when you’re a busy owner looking to build your business? Begin by realizing that understanding your finances is critical to running a successful business. This doesn’t mean you need to be a finance expert, but you do need to put basic controls in place to prevent fraud.
When reviewing your bill payment process, you may find it’s a lot easier than you may think to create proper controls.
While spending the time to create a strong set of controls may seem like it’s time you don’t have, think of it as an insurance policy. Would you own a home without insurance?
Once these controls are in place, you will see that you gain more insight into the way your company runs as well as a better understanding of you finances. At the end of the day, this will help you build a healthier, stronger business, AND prevent fraud.
Carly, the automated bookkeeper from Expex, doesn’t just automate bookkeeping tasks, she gives you complete financial visibility, so you can make better decisions. She thinks and acts like a bookkeeper- only smarter, faster, less expensive, and more secure than traditional bookkeepers.
Carly will create stopgaps and tools to mitigate the possibility of financial fraud by:
True, it does not always happen but why put yourself in those shoes? Ask us how we can help you and your business stay healthy, happy, and growing!