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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 | Fraud Risk Mitigation In Business

Many business owners are at significant risk for fraud within their business and arenít even aware of it says part-time CFO. Industry Canada says that 50% of all businesses close the doors to their business within five years, and that 29% of those entrepreneurs end up saying that the reason they close their business was because they ran out of cash. Helping businesses avoid fraud risk wherever possible can help them stay cash flow positive in their business and increase their chances of success.

There are many ways that business owners can minimize the risk of fraud in their business and one of the ways they can do that is by eliminating the petty cash fund within their business. Part time CFO says thereís no real reason why a business should need to keep cash on hand. Any payments that employees need to make it through to the course of the business day or week, can be done with company debit cards. Not only is the petty cash fund a significant risk for fraud, but itís also an audit risk. Business owners want to guard against not only fraud but audits, this how they can achieve that. Business owners should ensure that the debit cards they get their staff are limited use meaning employees could never make online purchases with that card. As well, business owners can ask the bank to limit the transactions that can be done on the card as well as have a daily limit. This way if the business owner does fraudulent activity on that card, they are only at risk for a couple hundred dollars.

Part-time CFO does recommend that businesses use debit cards and set of credit cards, however there are instances where businesses need to get their staff a credit card. Best practices for that is to only issue one credit card for each employee that needs one. They will ensure that that employee is the only person that has the credentials for that card therefore if fraudulent activity occurs, a business owner knows which card in which employee it came from.

In addition to having locked down debit cards and being careful at how the issue credit cards, part-time CFO recommends that business owners also arrange a read only access for their bank account. And he staff members who are working on finances in the business use that read only access account. We can see all of the different activities are happening in the business account, but they donít actually have access to the cash. This can help keep business owners safe from fraudulent activity, while allowing their staff to help them with financial tasks.

By being aware of what the risks are too business owner, they can take steps to avoid those risks, and protect their business from fraudulent activity. Once business owners have safeguarded their business against fraud, they can be assured that they will be less likely to run out of money in their business due to illegal activities.

Entrepreneurs that are starting out in their business often hire one person to work on their accounting and financial tasks says part-time CFO, never even understanding that they are putting their business at significant fraud risk. The reason for that is while business owner may only be able to afford to pay and staff member to work on their finances, not to having multiple people looking over their finances is risky. Thereís many ways that business owners can avoid this risk within their business. This article will discuss several of those ways.

Business owners should first and foremost understand why having only one person assigned to financial task is a significant risk. The reason for that says part-time CFO is because it is easier for a staff member to commit fraud when there is only one person looking at the financials. Business owners should always be aware that when there is one person working on the financials, it much easier for them to get away with fraudulent activities. Not only that, but it makes it even more difficult for mistakes to be caught. This is part of the reason why the recommendation is for business owners to meet with their accounting team each month, to catch these errors. But itís even more efficient if those errors donít have to be caught by their accounting team. Another reason why itís a good idea to have more than one person on financial tasks is it also protects the people that are doing the work. Thereís no chance that someone can accuse that employee of fraud when theyíre innocent if thereís 12 people working on financial file.

As mentioned earlier, business owners should be meeting with their accounting team on a monthly basis says part time CFO. The reason for this is because errors have been and need to get caught as well as accountants need questions answered in order to complete their work. We can also discuss any discrepancies they have and problem solve. By having a regular touch point, businesses and accounting teams can be assured that open communication can benefit everybody. It doesnít need to take a long time, the recommendation is 15 minutes once a month in order to avoid errors.

Business owners can also set up electronic fund processors on a set schedule to help reduce fraud risk. Part-time CFO says that this affect the business in so many ways. The business owner organizes the schedule of how theyíre going to disburse payments, and then those payments are organized that disbursement. This makes it very easy for a business owner to review all the scheduled payments, and or catch any fraudulent payments. This can be very easy for a business owner to look over because it changes the bank account from having several cash disbursements every single day to one big cash disbursement every couple of weeks. Easily the best payments and future payments.