Monitoring the Numbers for Fraud: Do You Know Where Your Money Is?

by | Oct 1, 2019 | Bookkeeping

Stop thinking and start acting

You spend your days thinking about the best ways for your business to earn money. Monitoring fraud is the last thing you want to think about but it’s important to know where your money is going if you want your business to grow.

If you operate a brick and mortar retail location, you probably installed security alarms, cameras, and other gadgets to safeguard against external perpetrators. You don’t feel right about mistrusting your employees when you don’t have monitoring fraud. Unfortunately, if they control the money that goes in and out of your business, your employees might be your biggest financial threat.

Opportunity, Financial Need, and Justification

If you have bond coverage to cover embezzlement and other theft crimes, your insurance company can explain some of the real risks you must consider.

When business funds disappear, it’s often an employee committing the crime. Men commit fraud crimes more often than women. An employee’s drive to help himself to your cash often starts with a strong financial need, easy access to your business accounts, and a mindset that makes fraud seem like a rational choice.

Common Fraud Tactics

Members of the Association of Certified Fraud Examiners handle fraud cases across the globe. That gives them access to data on the most common ways employees commit fraud. Their annual Global Study on Occupational Fraud and Abuse documents fraud trends. It shows that, internationally, employees accomplish fraud using the same tactics.

  • Corruption: Inappropriate payments, tips, kickbacks, and other schemes involving outside parties
  • Asset Theft: Cash skimming from receivables, refunds, voided receipts, inflated expense, payroll falsifications, and other techniques
  • False Financial Statements: Misrepresenting a company’s assets, liabilities, and financial worth

How They Do It

It’s easy for an employee to commit fraud when they know your business and control the incoming and outgoing cash. Trusted employees often have access to multiple methods and opportunities to remove cash from the flow. Here are just a few.

  • Fake checks and payments
  • Altered records
  • Fake vendor bills
  • Cash register pilferage and fake voided receipts
  • Payroll falsifications

Tracking your money

Employees get away with theft when companies have no system in place for monitoring fraud. The best way to avoid being a target is to set up security safeguards ahead of time.

You don’t have to perform all of your company’s financial tasks by yourself. That would mean some very long nights at the office. But you should be selective about who handles your money.

You must also review important financial documents, search your accounts for recurrent payments, high payments, and other unusual and unexpected trends.

Here are a few additional strategies that will help you feel confident about where your business cash is going.

  • Set a regular schedule for reviewing the reports that explain your company’s finances.
  • Never let one employee control all of your incoming and outgoing cash.
  • To prevent manual or digital document alterations, implement an automatic cloud backup system.
  • Consider online billing, payments, and bank record syncing to create a financial track record that’s difficult to corrupt.
  • Maintain owner-only check authority and limit company credit card use.
  • Make sure employee expenses are legitimate.
  • If you have a fulltime bookkeeper, consider regular audits.
  • Consider hiring an outside firm to track your numbers and provide regular updates and reports.

Goode Bookkeeping and Consulting

Contact us for more ideas about monitoring fraud and keeping track of your money. Give us a call at 860-659-6543 to schedule a consultation.

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