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By Ryan M. Gorman
Ways to Prevent Fraud
You think it won’t happen to you. After all, you’ve been working with these people for years. You trust them. Some of them are related to you. But fraud happens. In fact, it happens at an alarming rate. According to the Association of Certified Fraud Examiners (ACFE), U.S. organizations lose 7 percent of their annual revenues to occupational fraud, which translated to approximately $994 billion in 2008. The median fraud loss that year was $175,000. According to the ACFE, small businesses are especially vulnerable. One way to avoid being a victim of fraud is to reduce the opportunity for theft. Good internal controls can help.
1.
Think Checks And Balances When It Comes To Cash Receipts Divide duties so that no individual is handling all aspects of revenue cycle transactions. For example, no one person should open the mail,
post cash receipts in the accounts receivable sub-ledger, and make deposits. Instead, introduce a second individual to at least one of these tasks. Step in and perform some of these tasks periodically, so that you are aware of how revenue is flowing through the business.
2.
Check The Inventory Perform unscheduled inventory checks to ensure that employees aren’t going home with or selling assets on the side. Be visible on the warehouse and manufacturing floor at unscheduled times. Perform surprise counts of petty cash as well. Surprise visits and counts can uncover and/or deter theft.
3.
Sign The Checks Some owners sign payroll checks in addition to vendor checks. If this isn’t practical, consider signing checks over a certain dollar amount. Have monthly bank statements
sent directly to you, so you can visually scan returned checks and other bank activity for unusual transactions. Also, consider reviewing bank activity online between statement dates.
4.
Make Vacations Mandatory Fraud is often discovered when an employee is away from work and others step in to take over his or her duties. Be wary of employees who over-zealously guard their “territory” or work without vacation time, as they may be hiding something.
5.
Create a Reporting System According to the ACFE, nearly half of the fraud cases in 2008 were discovered by a tip or complaint from an employee, customer, vendor or other source. Set up a hot line or other system for people to report suspicious activities. Most employees are honest and will not tolerate theft. n
RYAN M. GORMAN IS SENIOR MANAGER AT WOLF & COMPANY, P.C.
Northwestern Mutual announces a total dividend payout of $4.6 billion. What makes this possible? As a mutual company with more than 150 years of experience, we’re completely committed to delivering financial security to our clients and policyowners. It’s with their interests in mind that we work hard to minimize operating expenses and maximize investment returns. David C. McAvoy, CLU® Managing Partner The Boston Group One Beacon Street, 25th Floor Boston, MA 02108 (617) 742-6200 nmfn-thebostongroup.com 05-2760 ©2009 The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM). David McAvoy is a General Agent of NM. Registered Representative of Northwestern Mutual Investment Services, LLC, a wholly-owned company of NM, broker-dealer and member FINRA and SIPC. NM and The Boston Group are not broker-dealers. The dividend scale and the underlying interest rates are reviewed annually and are subject to change. Future dividends are not guaranteed, although Northwestern Mutual has paid a dividend every year since 1872. 9029-067 12