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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 | How Small Businesses Can Minimize Fraud Risks

Many entrepreneurs who open their business are extremely good at working in that industry, and are not as comfortable working on some of the more technical aspects of running their businesses part-time CFO. They hire staff in order to take care of things that they donít want to do themselves such as accounting. But since they are a small business, they can only have one person working on their accounting and are unwittingly opening themselves up to increased fraud risks. There are several things that a business owner can do to guard against being defrauded most of them are easy and can be done immediately to protect themselves. Since 29% of failed businesses say that running out of money was biggest reason why they had to close their business, and being defrauded should be one of them.

The first thing that business owners should take into consideration when they are thinking about fraud in their business, is that they are opening themselves up to a huge risk if they only have one person working on financial tasks. The reason for this is part-time CFO is because if a person working on finances has no double check system, they would be free to commit fraud knowing that they have a very low chance of getting caught. But having two people working on anything financial at a time, ensures that it keeps both employees honest and unable to commit fraud in the business. Any business that has only one person working on the financials of their business, should consider either hiring else to work on at the same time, or to outsource that task. Even though many small business owners donít believe they can afford to outsource tasks, it is far more costly for a business owner to be a victim of fraud. Taking that into consideration, business owners can make the decision and how they want to eliminate this fraud risk from their business either hiring someone else, or sitting that task out.

Another thing that business owners should think about when doing their business finances, is to have a regular meeting with their accountant. Business owners often donít know why this is so important, and believe that itís an unnecessary meeting. However this is often where business owners and accountants can ask questions, compare notes and potentially catch fraudulent activities while there happening. The meeting doesnít have to be long, part-time CFO recommends 15 minutes once a month to ensure that their accountant has all the information they need to do a great job and protect the business.

So by either hiring a second employee to work on financial tasks, or outsourcing those financial tasks to a third party, business owners can completely eliminate the potential for being defrauded this way. Business owners can also guard themselves against fraudulent activities by ensuring that they continue to meet with their accountant every month compare notes and ask vital questions.

Industry Canada says that 50% of all businesses are out of business within five years, and 29% of those failed businesses say that the reason they close their doors is because they ran out of money says part-time CFO. There are several reasons why a business may run into cash flow problems and while business owners may not want to think about it, fraud is definitely one of those reasons. There are several ways that business owners can be defrauded in their own business, and by knowing exactly what those risks are, business owners can not only guard against those actions, they can even completely eliminate some of them.

The first thing that business owners can do in order to help themselves avoid fraud from inside and outside sources, is knowing that banks do not check the signatures on checks. Many business owners think that a signature is way that their checks are being safeguarded, but banks rarely check signatures if ever. If business owners know this, they may be more protective of their checks. Checks should be treated with the same amount of due care that business owners would treat the cash. Since it is so easy for someone to take that check into their own account, business owners should be protective of that money in their business says part-time CFO.

Another way that business owners can guard themselves against fraudulent transactions on their account, is by using electronic fund processor. The business owner can use electronic fund processor to set a schedule of when payments are going to come out of that bank account. This way they can reduce the number of cash disbursements that are happening out of their account, changing that from several times a day to just a couple of times a week or even once a week. This way, a business owner is better able to double check all of the payments, because they will happen as a group once a week or once every couple of weeks. Without this, it is extremely hard for a business owner to track all of the payments that are coming out there count on a daily basis. It streamlines the payment process and makes it easy to follow.

Business owners can protect themselves against fraud is by setting up read-only access for their business bank account that they give to any employees that are working on financial tasks. Since its read-only access, business owners can be sure that their employees can see all the charges and work on financial files but they are actually unable to commit fraudulent payments Part-time CFO. It is a very simple way that businesses can completely avoid that employee from being dishonest.

By being aware of all the different ways that their business could be defrauded, and by taking some very simple steps to guard against that, business owners can greatly reduce or completely eliminate the risk of being the victim of fraud in their own business.