A woman in her 30s pleaded guilty some time back to stealing more than one million from a small business to fund her lavish lifestyle. At the time that she stole from the small business the woman was employed as the manager of the firm.
A fatal flaw was that this person held the passwords to the owner’s bank accounts. This enabled her to make electronic transfers from both accounts. She siphoned off the money before she was caught out.
The irony of this story is that the woman has a degree and is qualified.
Some people blame the business owner for not having stricter controls in his business. Surely, he should’ve noticed his money disappearing, they say. Giving so much control to one employee is taking things too far.
A basic level of trust is needed in any small business because without it it’s hard, if not impossible, to operate. But when it comes to financial matters strict controls need to be in place. Lackadaisical, slack and laissez-faire arrangements don’t work.
A professional communications agency ran into similar problems some time back. I was told the story in detail but basically the bookkeeper embezzled so much money that the company to shut its doors. Can you believe it? A reputable communications company was forced to close because of a fraudulent employee.
The only remedy to employee fraud is to put in place strict financial controls. The best person to advise you on what you should do is an accounting or financial services company that has a strong reputation for financial risk management.
If you leave any crack in the door open, the temptation for employees is just too great. They will find a new hole in your accounting or cash-handling system and try to get away with it. Fake refunds is one way that employees tried to steal money. They may make refunds in the form of repayments to fictitious customers when no goods were returned or if you have overpaid a supplier’s invoice. Customers signing for the refunds or suppliers receiving credits for overpayments may be a suitable remedy.
In businesses that handle mainly cash, it’s important to closely monitor inventory and ensure that every customer receives a receipt.
Skilled fraudsters keep their routines going for long periods. They also need to be present so that they can continue with their fraudulent transactions. Make sure that you monitor the leave or off days of your staff who handle your money in your small business. Ensure also that they take all vacation that is due to them.
It’s important to separate authority to disburse funds and accept payments as well as make bank deposits. A separate person would also need to record transactions and reconcile account balances.
Your accountant or financial services professional will help you conduct an internal control review to go over handling of accounting responsibilities and re-allocate so that you are better protected.
Here’s the thing: if you’ve read this and are worried about the financial control setup you have in your small business but do nothing about it then you only have yourself to blame. Schedule a meeting now with your accountant or financial services risk management expert before you get suckered by one of your employees and lose millions like the small business owner or the established communications agency.