Fraud Prevention Tips – Part 1

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fraud protectionIf you read the news, online or offline, you’ve undoubtedly seen numerous stories about bookkeeping and accounting fraud. And unfortunately, they seem to be appearing with great regularity.

If you’re not careful it can affect your business too. In this two-part series I offer some advice on steps you can take to help prevent fraud and keep you from being a victim.

Double entry accounting for all client receivables. Make sure that any and all payments to clients use invoices. As the business owner only you or trusted employees should handle client payments. And all payments must be either secured or immediately deposited.

Regular Reconciliations. This is a must do.Perform them once a month for each bank and credit card account. Always use a different person for posting payments and receivables than the person who is responsible for looking for discrepancies through the bank reconciliation. The same goes for reconciling the credit card accounts – it should be someone different than the person using the credit card.

Do a Regular Physical Inventory Count. This way you can stay on top of your inventory and make sure nothing has been stolen or missing.Always make sure that two people do the inventory count,if it’s not already done by you. The utilization of bar code scanners or other secure methods of tracking inventory for checkout procedures and to locate missing inventory can also help.

Do a fixed asset inventory count. If you have fixed assets count them at least once a year. These are big ticket items and sometimes can go missing and are usually expensive to replace, especially if you have a large company. Not only keep a ledger of these assets, but detailed sub-ledgers too.

Use Purchase Orders for Inventory. This shows that products or services requested are approved, that quantities accurately reflect prices paid, and the number of items received. Physically count your inventory and make sure one person is responsible for physically opening and counting inventory received. Also check that packing lists match the physical count, the purchase order, and the vendor’s invoice.

Cheque Signing Authorization. Before vendor cheques are printed or sent for payment, management should approve and sign off and authorize which bills are to be paid.Ensure that employees that are entering the bills are not the same people authorized to issue and sign cheques for the company.

Manual cheques should be removed from the process as much as possible. If your bookkeeper can create cheques, make sure they don’t have the ability to delete cheques from the register and cannot print cheques without saving them. Ensure the commercial bank account does not permit debit cards or cash withdrawals and does not allow cash back on deposits. Blank cheques should be kept in a secure location.

Review Outstanding Cheques and Deposits. Typically transactions clear a bank within 2-3 days. Aged outstanding cheques or deposits should be reviewed to make sure that they are not duplicate transactions, errors or a way to hide fraudulent activity such as deposits that are not real.

Most of these are common sense. Don’t wait until you are a victim before implementing some or all of them. And finally, it is just good business sense to make sure your bookkeeper and your accountant work with different firms. This will give you, as the business owner, one final check and balance of your financial records. Like many people, business owners work hard for their money. Make sure you take the steps necessary to minimize the chances of being victimized by fraud or theft.

What procedures do you have in place to help prevent bookkeeping fraud? We always appreciate and look forward to your comments.

Check out Tips To Protect Your Business From Fraud – Part 2

 

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Juliet Aurora

About the Author:

Juliet Aurora is the President and CEO of AIS Solutions. She has been in the Accounting and Finance space for more years than she will ever admit. When she isn’t acting as the Sensei for her team of Bookkeeper Ninjas, you will find her working tirelessly to advocate the accreditation of bookkeeping in Canada. Her vision is for AIS Solutions to become the standard against which all other bookkeepers and bookkeeping firms are measured. Juliet can be contacted by email or by calling 1 888 575 5385.
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