6 Tips to Protect Your Business from Embezzlement

You can hardly turn on the news these days without hearing of a case of embezzlement. It's happened to businesses big and small, and even several in our own Fort Collins community. Many business owners have a flawed logic that they can trust their bookkeepers and don't feel the need to add financial controls because of the "it won't happen to me!" mentality. But in reality, according to a study by Score.org, "Four of every five victim organizations had fewer than 100 employees; just under half had fewer than 25 employees," and the average loss is over $800,000.

While you may trust your bookkeeper or accountant, it's not a good idea to give one person complete access. The temptation may be too great and you'll be putting your business at great risk for potential financial ruin at the hands of an embezzler. If you're afraid of sending a message of distrust to your employees, don't worry, good bookkeepers will recognize the need for controls and won't feel offended.

Whether you own a big or small business, there are many controls you can put in place to protect your business from embezzlement. Use these tips to avoid embezzlement:

1. Segregation of Cash Duties - Separating the cash responsibilities and payroll among more than one person is one of the best things you can do to protect your business from fraud. It will add in a system of checks and balances will keep one person from complete control and reduce the likelihood of embezzlement. Click here to read more about how to segregate cash duties. 
2. Use a Checking Account - Instead of handling things in cash, use a bank account that will automatically keep record of all payables and receivables. Bookkeepers may be able to manipulate financial statements but they won't be able to fudge the actual money in the bank. 
3. Secure Cash - If you must use cash, be sure to keep it locked in a secure place when unneeded and have more than one person check the totals at the end of the day. 
4. Review Your Statements and Accounts - Business owners should check their accounts and financial statements with an eye for anything suspicious on a fairly regular basis. Instead of just assuming everything is safe, keep tabs on where things should be and check for any inconsistencies. This will help alert you to anything suspicious.
5. Stay Involved - Once your business is big enough to hire an in-house accountant or bookkeeper, it can can be tempting to forget about the books and get back to the heart of the business. Our biggest advice is to continue to check in on the accounts, chat with 3rd party vendors and customers, and stay in-tune with that side of the business. 
6. Schedule An Audit - A periodic 3rd party audit by an unrelated company such as Tally Services is a good way to keep everyone honest. We can do everything from a spot check to a comprehensive audit that will identify anything out of the ordinary and can save your business from embezzlers. 

Embezzlement is a huge problem in the United States. In fact, recent statistics reveal that as many as one third of small businesses fail at the hands of embezzlement! Don't let this horrible practice befall your business, work with Tally Services to put in financial controls and audits that will protect you and your business. Contact us to collaborate on a solution that will work for your needs.