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E-Myth – “Why most small businesses don’t work & what to do about it”

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Part-time CFO | Eliminating Small Business Fraud Risks

many small business owners may not realize that their business could be at risk for fraud says part-time CFO, however thereís many reasons why a small business could be at risk. 50% of all businesses close the door to the business within five years, and out of those businesses 29% of them will say that they failed because they ran out of money. There is many reasons why a business owner may run out of money and fraud should never be one of them with how easy it is to prevent. Thereís many things a business can do to eliminate and minimize their risks of fraud within their business.

There are many questions business owners can ask in order to help them eliminate fraud risks within their business. Why is only having one person assigned to a financial task a significant risk? The reason for this part-time CFO says is because when there is only one person working on a financial task, there is no double check system for if thatís person makes mistakes, and also if that person is committing fraud. It is much easier for a person to get away with fraud if they know there is no and thatís going to be checking the work that they do. Itís extremely easy for businesses to eliminate fraud and catch any mistakes by putting two people on to a financial task. If thatís not possible for small business because they donít have enough people, business owners can also consider outsourcing the task, it may be a lot more economical than they think, especially if it guards them again fraud. A two-person team can also protect themselves against being accused of anything.

Do banks check the signatures on checks? Many business owners believe that banks check signatures to see if they match all the time, but the truth of the matter says part time CFO is banks rarely check if they ever do. Business owner is handling checks in their business, they needs to treats those checks same way as cash and be very protective of them. Since the bank is not going to be catching any fraud, business owners need to be very diligent.

How does using electronic fund processer on a set schedule reduce fraud risk? This is a great way that businesses can not only protect themselves against fraud risks is part-time CFO, but they can also simplify their payments, and make it much easier to attract. They can move all of their payments to an electronic fund processer and eliminate how many cash disbursements that are coming out of their bank every day. They can set up that electronic fund processer to disburse payments once a week once every two weeks or once a month, and then itís very easy for business owners to be able to see not only the charges that are going through the accounts, but it makes it much easier for them to catch any fraudulent charges because it reduces the number of transactions through their bank account.

Many business owners often have only one person in charge of the accounting or finances of the business, and this is a significant fraud risk says part-time CFO. The reason for this is because with only one person work on finance, it makes it very easy for them to be dishonest and it also increases the chances of mistakes happening and then not being caught. There is very simple things that a business owner can do within their business to guard against fraud risk and protect their business. By asking themselves these questions, business owners can consider what they can change their business to reduce and eliminate the potential fraud within their business.

One question business owners should ask is petty cash fraud risk, and how they use a debit card to avoid it? Petty cash is an extreme risk but then it business says part time CFO and the reason for this is because employees can steal the cash, or is it for nonessential purchases for the business. And fact of the matter is, thereís nothing that an employee would have to pay for that couldnít be paid by a debit card. By eliminating the petty cash fund in business, and using bankcard that is protected as locked and unable to make purchases, businesses can guard against employee theft. The bankcard can have a limit on it, so even if employees do use the card irresponsibly or fraudulently, business owners would only be out a few hundred dollars instead of thousands.

How do people use dummy corporations to defraud company? When a employee that is working on a businesses accounts payable and wants to commit fraud, they may creates a fake corporation to send payments to. When the business owner reviews the charges they see a corporation in with the payments scheduled, and they believe that it is legitimate. Meanwhile the employee sends payments to that dummy corporation it goes to them and they cash the check. Business owners can guard against this threats by questioning payments they donít recognize. They should understand that just because it looks like a corporation doesnít mean itís a legitimate says part-time CFO. By questioning all charges that donít make sense even if they look legitimate is a great way for business owners to guard against fraud in addition to having two people working on any financial file.

How easy is it for people who control payroll to inflate earnings? Part-time CFO says this is easy to do but it is hard to catch. Employees can defraud businesses on payroll and a number of ways including inflating their own hours or inflating the wage they pay themselves per hour. Another sneaky way is when the person doing payroll pays much higher source deductions than they should to CRA for themselves. When year-end comes, CRA has collected more taxes for that employee than they need, and send back a refund cheque. But instead of the check coming back to the business, it goes to that employee who then cashes it and keeps the money. This is extremely hard to catch because a business owner will see a lump sum payments to CRA and not to question.