In times of economic turmoil the incidence of fraud and embezzlement increases.  You can protect yourself by implementing and enforcing a few simple procedures.  These procedures are ones all business should follow regularly but may have been lax in enforcing.  Now is the time to tighten up the ship.

1. Manually sign all checks. Do not use a signature stamp.
2. Only sign a check if it is supported by an invoice, a purchase order or check request explaining the purpose of the disbursement.
3. Rotate who opens the bank statement each month and make sure the person who prepares the checks or prepares the billing is not involved.  Open the statement as soon as it arrives and look for any odd or suspicious.  Call the bank if you are even mildly concerned.
4. Have someone not involved with paying vendors or collecting from clients prepare the monthly bank reconciliation. Someone from senior management, if there isn’t a CFO, needs to review the monthly bank reconciliation.
5. Review the list of invoices prepared each month to identify any customers you do not recognize.  If anything looks odd, call the customer and verify the order.
6. Manually approve all electronic transactions. A form similar to a check request can be developed to support the individual transactions.
7. Verify all unused checks are accounted for. This is done by periodically flipping through the unissued checks to make sure there is no break in the numeric sequence.
8. Keep checks locked-up with as few people as possible having a key or knowing where the key is kept.
9. If you experience an unusual and unexplained cash shortage bring in a consultant to investigate.
10. If you do find evidence of fraud or embezzlement make sure you prosecute the individual so they don’t become a repeat offender.

A former client suspected one of its senior people was ripping them off by charging things to the corporate credit card. Things that could possibly pertain to the project the person was working on. It went on for years and no one investigated. When they finally acted they determined they were out in excess of the $250,000 they were able to recover.