Fraud Prevention Tips – Part 1

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

Share this:


Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.

Juliet Aurora

Juliet Aurora is the CEO of AIS Solutions and Co-Founder of Kninja Knetwork. Through both of these businesses she fulfills her mission to Educate and Empower those around her. In 2017, her firm was named Intuit's Global Firm of the Future, the first time the title has ever been awarded to any firm outside of the US. She has also has been named as one of the Top 50 Women in Accounting, one of the Top 50 Cloud Accountants and one of the Top 10 Canadian Influencers in the Bookkeeping Industry. Her passion for education is channeled through the Intuit Trainer Writer Network, hosting Kninja Knowledge Webinars and most recently, developing a Cloud Accounting Course for the next generation of accounting professionals.


Submit a Comment

Your email address will not be published. Required fields are marked *