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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 | Protecting The Small Businesses Against Fraud

Often, many entrepreneurs are not even aware that their business is at risk for being defrauded says part-time CFO. The worst part is, these businesses arenít aware that they are at risk right to from their own employees. By making the assumption that their staff are honest, or will never make mistakes, entrepreneurs can find themselves out thousands of dollars years down the road and wonder how they got there. There is many things that businesses can do in order to guard themselves against becoming the victims of fraud. Some of those tasks will greatly minimize those risks and some will completely eliminate it.

One of the biggest risks that business owners take when it comes to having staff work on their finances is they only have one person assigned to that financial task. The reason why this is such a significant risk is because when staff member is working on finances unchecked, they have a extremely high potential for committing fraudulent activities and not being caught. If the business owner had the policy in place that two staff members who had to work on financial tasks together at all times, they could eliminate the potential of one staff member being dishonest and committing fraud. Itís much harder for someone to commit fraud when they are working with someone else.

Business owners also needs to understand that banks do not check the signatures on checks. Many business owners and people in general believe that banks will be checking the signatures on all the checks, and that is the double check system to ensure that they donít get defrauded, however business owners need to realize that banks rarely, if ever check those signatures says part-time CFO. A good rule of thumb that business owners should use when dealing with checks, is treats them like they would treat cash. They should be very protective of them, and not leave them lying around.

Business owners should also understand that somebody cash is a fraud risk. Not only is it a risk says part-time CFO but it is completely unnecessary to have petty cash in businesses anymore. A better option for business owners would be to get a company debit card with a limit on it. That way employees can pay for the things that they need to purchase, and they donít have access to all the cash that we could steal. If a business owners put a limit on that card, they can rest assured that even if an employee was dishonest, theyíd only be out a few hundred dollars instead of potentially thousands. Many business owners think instead of getting a debit card they should get a credit card, but this is a bad idea for several reasons. If they do have to get a credit card for an employee, they should only give a credit card up to each individual play that needs to happen, and ensure that they do not share their credit card credentials.

Industry Canada says that 50% of all entrepreneurs close the door to their business within five years, and 29% of those entrepreneurs will say that they ran out of money is a reason why they had to close their businesses part time CFO. Cash flow is so vital to small business not only in the beginning, and business owners need to always be mindful of cash flow in their business. However mindful they may be, many business owners arenít aware that they are also at risk for fraud rate within their own business. This can greatly impact a businesses cash flow, and with all the other risks that business owners face in business the day, running out of money because someone stole from them is one of the more avoidable ones.

There are several ways that businesses can become the victims of fraud in their own business, but using credit cards and debit cards very smartly within their business, can ensure that this would be one of the ways they are defrauded. Part-time CFO says rather than having credit cards in the business for staff to use, business owners should have debit cards. Debit cards are a lot safer, and can have a lot of predictions built into them. For example, a business owner can put a transactional limit as well as a daily limit on a debit card, that way employees would not be able to use the card for large purchases or steal a lot of money from the company. And even if they did take the money says part-time CFO, they would only get a few hundred dollars instead of a lot more.

Many business owners in their attempt to do away with the petty cash fund in their business, gets a companywide credit card. Although the business card credentials are shared with the entire staff, and is used for making purchases in the business. This is a bad idea says part-time CFO because if the credentials are shared among all staff, there is no way for a business owner to check who made purchase that will potentially fraudulent. If business owners are going to have credit cards in their business, they should give only the staff members that absolutely need a credit card one, and ensure that they are responsible for that credit cards credentials. That way if something fraudulent does happen, a business owner is able to know who make that purchase.

Not only does eliminating the petty cash fund business guard against fraud, but it also guards against being audited on that petty cash. There are several ways that businesses can guard against employees stealing money directly from them using petty cash credit cards or debit cards, so there is no reason why business owners should fall the victim to fraud in this way. Once business owners know the different ways that this data could defraud them basing the cards and cards, business owners can guard against that in their business.