Clarisent describes how you can prevent business theft. When it comes to protecting your own enterprise from wrongdoing, it’s wise to go the extra mile, leaving no room for error.
1. Preventing Business Theft
Recently, a bookkeeper was sentenced to two years of jail time for embezzling $200,000
from her employer. How did this happen? Three words: no internal controls.
Internal controls are a system of checks and balances designed to catch accounting
anomalies, for the purpose of protecting a company’s assets from human error and
malpractice.
In this case, the bookkeeper had access to a company credit card, and was able to record the
credit card transactions in the accounting system and reconcile the account. As a result, she
charged personal expenses without anyone knowing. The bookkeeper was also responsible
for writing checks, reconciling the bank account and opening the mail. This unprecedented
authority made it possible for her to write checks for personal expenses, forge the owner’s
signature and intercept bills.
The business owner remained unsuspecting, thinking his business was just having a bad run.
He was forced to lay off six employees and came very close to going bankrupt because the
cash he should have had was spent on a Mercedes, multiple trips to Las Vegas, expensive
clothing and other luxurious items that he never got any sight of.
What’s a business owner to do to shield themselves and their business from such
malpractice? The answer lies in segregated duties. The person charged with writing a check
to pay bills, for example, should not also enter the bills nor should they be able reconcile the
bank account. In our example, the company had 35 employees and hence was sufficiently
large to create a close to optimal system by having more than one person overseeing
accounting.
But what do you do when your company only has a handful of employees? In such a case,
first and foremost, the owner should have a more active involvement in the accounting
2. process. I’m not suggesting that the owner actually do the day to day bookkeeping
themselves. Rather, it would be prudent for them to approve all payments and sign all
checks. Additionally, it would be in their interest to monitor their cash balance via the
internet and for them to closely review financial reports on a regular basis.
The second most logical thing to do is to hire an outsourced CFO who would bring aboard
extended experience and provide another layer of protection to the financial assets of the
business. The CFO would be charged with overseeing the accounting function and
monitoring it on a daily basis, ensuring any discrepancies get called out before it’s too late.
They will also be incharge of the financial stability of the business - suggesting steps to be
taken to secure the business’s position, as well as piecing together an accounting system
that aids financial strategy.
Running a successful business usually means having all hands on deck. Too many successful
businesses have hit the dirt, succumbing to complacency on part of their management.
When it comes to protecting your own enterprise from wrongdoing, it’s wise to go the extra
mile, leaving no room for error.
Source: https://getclarisent.com/preventing-business-theft/