It’s a chilling statistic: 65% of people in “trusted” positions will commit some type of occupational fraud.

I was reminded of this recently when a small business owner shared their business was the victim of an embezzlement.  It was only caught when the business owner noticed a suspicious e-mail.  This is when most business owners institute the internal controls they haven’t had time to implement.

Given it’s the holiday season and the economy has left many cash strapped fraud can increase.  Here are steps you can implement to prevent fraud:

1. Separate accounting and financial control responsibilities, this means the person sending out the bills should not reconcile the bank statement.
2. The CEO/business owner might do a surprise review of the bank statement before it has been opened.
3. Require all disbursements, i.e. checks and electronic, to have two signatures of approval and the signatures should be manual not a stamp.
   
4. Conduct background checks on employees including criminal checks where the position has access to company funds.
5. Create a process to make it easy for employees to come forward with information on what might be suspicious activities.
6. Document procedures and annually audit the procedures to see how well they are being followed.
7. Engage accounting and other professionals to help institute appropriate policies and procedures that protect the company and the employees.
8. Press criminal charges.  Fraud is a criminal act yet many business owners fail to press charges.  They are embarrassed to admit it happened to them…so the criminal moves on to their next victim company to do it all over again.

Several years ago while serving as the contract CFO of a non-profit I instituted a very specific form and procedure for moving funds.  While I did not have signatory authority (by choice), it was still possible for me to move funds.  This left the organization and me exposed.  I created the form which required the executive director’s signature and notification of the treasurer so the funds transfers were transparent.  I was protecting the institution and myself.