Protecting your organization from embezzlement

FROM VAILDAILY.COM

The most prevalent finance crime affecting small businesses, nonprofits and clubs is embezzlement. Embezzlement is often times very tough to spot, but there are warning signs that you can watch for. Known as “The four D’s,” debt, divorce, drugs and disgruntlement, these pressures can lead even your most trustworthy employees down the path of financial embezzlement. Aside from the warning signs, you can protect your organization using very simple fraud prevention measures:

• Division of duties: Divide the accounting duties of check writing, invoicing, payroll, and bank deposits between at least two people to allow for a system of checks and balances. Cross-train and switch the duties amongst your employees periodically.

• Review your monthly bank statement: Look for red flags including checks in non-sequential order, cash withdrawals, checks to unfamiliar vendors, and checks to individuals.

• Embrace technology

Internet/mobile banking: Allows you to view current and past statements, paid checks, withdrawals, deposits, etc. anytime from nearly anywhere. Also allows you to set up email and text alerts to inform you when transactions above your predetermined threshold hit the account.

Positive pay: Allows you to send a list of the checks you write which the bank then compares to before paying. An embezzler trying to slip extra checks into the run will be tripped up before it even hits your account.

• Annual audits: Have your books audited by an independent third party. Audits can be expensive but they are worth it not only from an informational perspective but from a financial security standpoint. Audits can not only shed light on cash flow irregularities, but they can actually deter embezzlers who know that someone outside the organization will be checking their work.

• Deposit daily: Don’t temp fate by letting cash or checks build up at the office.

• Require time off: Employees who don’t want to take time off may just be loyal, but they may also be perpetrating fraud. A minimum of one contiguous week off for all employees will allow time for fraudulent activity such a check kiting to surface. It also allows you time to audit their work.

• Keep unused check stock in a safe place: Losing track of a check book is one of the most common was to expose your organization to fraud.

• Keep track of petty cash: Don’t temp people by being careless. Embezzlers usually start small and build over time.

You have worked hard to build and grow your business. You owe it to yourself and your employees to add these little extra steps to keep your business thriving.