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Often small businesses can only afford to have one person in charge of the accounting says part-time CFO, they may have a filing system that no one else is familiar with, or the records are out of date and all the sudden the business owner realizes that money is going missing. Small businesses are more at risk for fraud than they realize, and learning how to minimize the fraud risk in their business is important to guard themselves and their money they worked so hard for. They can ask themselves a series of questions to learn more about what they can do in their business to eliminate fraud.
How can employees use payroll remittances to defraud the company? This is an extremely hard fraudulent activity to catch says part-time CFO. What a fraudulent employee would do, is that when they are arranging the source deduction payments to CRA, they pay for more source deductions on their own name then is necessary. A business owner will see the lump sum payment to CRA and assume that the correct payment, meanwhile the employee does this throughout the year and when it comes time for tax returns, CRA will see that theyíve paid too much in taxes and send a refund check. The problem with this is that they send the refund to the employee and not the business owner, allowing the employee to cash the check and pocket the money. This is extremely hard to catch if only one person is working on payroll, because the business owner will just see the payments to CRA and believe that it is getting done properly. The only way they can catch that is to add up all of the deductions that are supposed to come up by hand to catch the discrepancy. Business owners can completely eliminate this risk by having two people work on payroll. Sometimes this is not an option for very small businesses, therefore a great way to eliminate this risk completely is if a business owner uses a third-party payroll company. It is very cost effective and 100% effective in eliminating fraud this way.
How easy is it for people who control payroll to inflate earnings? Part-time CFO says this is extremely easy for employees to do. All they have to do is increase the number of hours they were supposed to be paid for, or inflate their wage per hour. This is extremely easy to avoid if business owners can have two people work on payroll. Part time CFO also recommends business owners outsource their payroll. It doesnít cost a lot, and it can completely eliminate the potential for fraud.
Should businesses share credit card credentials? This is absolutely something that business owners should not do. They should only send out credit cards if they are absolutely needed, getting a debit card with the limits is a much safer option, however if businesses needs to issue that credit card, they should not have a group credit cards recommends Part Time CFO. The reason for this is if a fraudulent charge does happen, itís extremely hard for business owner to know who was responsible for that bad charge when it is a group card.
50% of all businesses close the doors within five years says part-time CFO, and 29% of those entrepreneurs will say that the reason their business failed was that they ran out of money. There are several reasons why a business may run out of money, but fraud should never be one of those reasons. There are several easy things that a business owner can do to completely eliminate the risk of fraud in some cases, and drastically reduce the risk of fraud and others.
The ways that business owners can reduce the risk of fraud within their business, is to have a regular meeting with their counting each month. Many business owners are extremely busy, and they donít understand why itís important to have a regular with their accountant. However, being able to check in regularly with the people working on your finances is a great idea. Part-time CFO recommends that the meeting only needs to be 15 minutes, and can be a great way for business owners to be able to ask some basic questions to their accountants, and a time where accountants can ask questions the meaning of the answer to to complete their finances. This also is a double check system that can allow both sides to figure out if there had been any issues that could be a red flag.
Why is only having one person assigned to a financial task a significant risk? by only having one person working on any financial task business owners are at risk because it makes it that much easier for an employee to commit fraud when they know nobody else is going to be watching. It also can increase the number of potential errors because theyíll be nobody double checking their work, and even if the employee didnít intend to commit fraud, those errors can be costly. Part time CFO says Business owners can easily remove that risk having two people work on any financial file.
is petty cash fraud risk, and how can businesses use a debit card to avoid it? Part-time CFO says pay cash is absolutely a fraud risk and absolutely not necessary in business. There is no reason that business owners need to keep cash on hand anymore, and the purchases that employees may need to make can be done with a debit card. If businesses get a company debit card and ensure that it canít be used on the Internet and set a limit on it, they can not only greatly minimize the risk of fraud, but they can also eliminate the risk of getting an audit amazing petty cash.
By using these strategies, business owners can completely eliminate fraud risks in some areas and greatly reduce the risk others. By doing simple things, business owners can protect their business.
