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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 | Helping Businesses Mitigate Fraud Risks

An all too common problem that business owners of new businesses face is staff members defrauding the company says part-time CFO. Many business owners do not think about how their business is at risk from their employees until they discover itís too late. There are several ways that businesses can completely avoid or minimize fraud within their business, as long as they know what ways their business is at risk. Since 50% of all businesses close their business within five years and 29% of those failed businesses say that running out of cash was the reason they close their doors. Having to close the doors because they donít have enough money is terrible, but even worse if it was avoidable.

Many business owners do not think that they are large enough to outsource several of their financial tasks. They may worry about how much money itís going to cost them to get pretty payroll company, or accountant to manage their finances. However they donít take into consideration that without hiring outside help for finances, they may be opening themselves up to losing even more money through fraud. One of the most common ways that employees steal money from the company is through payroll fraud. The way that a employee may defraud the company is by using payroll remittances. The staff member will calculates all of the source deductions that need to go CRA, but they will add a bit extra on to their account. They do this every pay period for the entire year, and at tax time, CRA calculates they have significantly overpaid in source deductions and issues that employee check for the difference. They cash the check and steal the money. This is extremely hard to catch and even the most of vigilant business owners may have a hard time seeing this error. But by simply outsourcing this to payroll processing company, business owners can completely eliminate this entire scenario being able to happen. Another way that employees can defraud the company through payroll says part-time CFO is when they are processing pay roll, they increase the hours that they should get paid for, or increase the wage per hour. They take little bits of money over a long period of time and it can add up. Staff members who have been found guilty of this are often discovered because they have been able to steal hundreds of thousands of dollars over several years. Not only is this devastating, it is completely preventable.

For these reasons, part-time CFO recommends that business owners still donít outsource their financial tasks, they should definitely ensure that more than one person is assigned to those financial tasks. Itís far too easy for a dishonest employee to steal large amounts of money for years. This can not only financially cripple a business, it can completely ruin the company and forced them to close the doors to their business permanently. Business owners need to decide if they can afford to pay a little bit now to avoid paying a lot more later.

A very common way that businesses open themselves up to fraud is through poor credit card practices says part-time CFO. Any business owners get credit cards and give them to their staff so that they can make purchases in the business ownerís absence. This is a terrible idea for many reasons. There are several ways where employees can defraud the company through the use of company credit cards. There are many very simple alternatives to this that can minimize the business ownerís risk immediately all while continuing to allow the employees to purchase things that they need for the company and for the business owner.

The first thing that business owner should do when it comes to company credit cards is to cut them up. Thereís very few reasons why business owners need credit cards when they should be using bank cards says part-time CFO. They can have their bank put limits on to their debit cards, to minimize the amount of money that can be accessed per transaction. They can also have their bank put limits on how much can be purchased in a single day. By setting low limits, business owners are allowing yourself to be able to purchase what they need to, all while eliminating the ability for their staff to be able to access their entire bank account. The staff can make purchases that they need for the business, and the business owner is not at risk for losing a lot of money. If there staff member does create a fraudulent charge on the debit card, business owner is not at a great risk for having lost a lot of money. Another way that business owners can minimize risk on their debit card is to lock that card from being able to make online purchases. With all the advances in debit cards, thereís no reason why a business owner should have credit cards in their business being used by several people.

The second thing that business owners should do when it comes to using company credit cards, is only give one card to each employee that absolutely needs to have a card. With how easy it is to have locked down debit cards, business owners should we consider if there staff even needs credit cards at all. If there staff members do need credit cards, business owners should avoid at all costs having one group company card. The reason for that is if several people have access to that card as well as that cards credentials, a business owner will have no way of knowing which employee did the fraudulent charge. A better way is for the business owner to give the specific employee one card and ensure that they are the only person at the credentials to that card. If a fraudulent charge appears, the business owner will know for sure whoís at fault says part-time CFO.