UpFront THE TROUBLE WITH BUSINESS

Embezzled!

If you think employee embezzlement only happens in large companies, think again. By Chris Panek and all checks should be stamped For Deposit Only immediately when received. ________

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any cases of embezzlement happen in small businesses and involve a trusted person who is taking money from an unsuspecting business owner. The most common types of theft occur by stealing cash, claiming fake expenses, and taking property. Smaller organizations with limited resources are often targeted by their own employees, directors or officers. Employees who embezzle have typically worked for that business for several years before starting their criminal activities, and on average continue stealing for about three years before they ever get caught. The losses for those businesses add up quickly, but can be reduced significantly when detected early.

Early Detection

You don’t have to be a victim. Every business should consider implementing the following fraud prevention and detection activities: Hiring policy Have a policy that includes past employment verification, a background check, credit check and education verification. Use it for every employee, not just the ones you expect to handle money. ________ Reconcile your bank Make sure all money coming in and going out of the business goes through a checking account and reconcile your bank statements monthly. If you have cash transactions make sure to deposit money daily

Safeguards Segregation of duties and physical safeguards should be put in place. An employee who can request or approve payments should not have access to the printed checks. There should always be at least two people involved whenever money is being paid from the business. One person in control of the money coming in and another one in control of the money going out. ________ Vacation time Requiring employees to take time off not only helps to prevent fraud, but you can also make sure you have systems in place to cover key employees when they are absent. Don’t let your employees accumulate too much vacation time. ________

Login checks Make sure everyone has separate logins for their computers and use multifactor authentication whenever possible to prevent employees logging into computers under another employee’s login. Monitor audit logs from accounting software on a consistent basis.

WATCH OUT!

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Signs of Trouble

Some of the things you should watch for that could indicate possible embezzlement include: 1 Employees who are misplacing files, not cooperating with other employees or working when no one else is around. 2 Employees who are financially strapped, under pressure for extra income, or recently divorced or facing family problems. 3 Employees with excessive control issues or objections to procedure changes in the office relating to finances. 4 Employees who refuse to take vacation. 5 Employees who consistently want to take work home. 6 Employees living beyond their means – expensive cars, jewelry or traveling. 7 Petty cash disappearing too quickly. 8 Business credit cards being used for personal expenses.

contributor Chris Panek is a Certified QuickBooks ProAdvisor and Certified Public Accountant at Christine R Panek, CPA. She has over 20 years of experience helping small businesses with accounting and bookkeeping, financial statement preparation, QuickBooks consulting, and payroll services in the St. Cloud area. 22

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