A business owner wears many hats.  One of those hats should be fraud detective because small businesses are by far the most vulnerable to employee fraud.  While you may want to believe the best about your employees, you should be proactive to prevent someone from taking advantage of you.

  1. Is the person who takes payment from customers the same person to make a bank deposit and reconcile receivables?   These tasks should be split among employees to prevent one person from having unlimited access.
  1. Who approves expenditures and writes checks for payables?  Make sure you review invoices and recognize all the vendors or purchases you write or sign checks for each month.  Are all checks accounted for each month?  Do you have a signature stamp laying around the office unsecured?  Make sure that you have division of these duties and safeguard checks in order to prevent opportunity and temptation.
  1. Do your employees seem to spend more than they make?  If there doesn’t seem to be a good explanation for this, you may want to pay closer attention.
  1. Do you require employees to take vacation every year?  Many frauds are detected when an employee is away and someone else is performing his/her duties.
  1. Are you paying employees for time they did not work?  Review employee timecards and compare against work schedules to discourage an employee from claiming and being paid for more hours than they actually worked.

Honorine M. Campisi, CPA