Your,Business,Protected,From,F business, insurance Is Your Business Protected From Fraud?
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Can your business survive a $200,000 embezzlement or otherfraud scheme? What if that scheme wasspread out over 10 or 15 years? Wouldyou notice? Denise, a $35K a year bookkeeper, for a small truckingcompany in Alabamais facing several years in prison for embezzling over $550,000 from thecompany. What did Denise do with allthis money? She spent it on cosmeticsurgery, new cars, luxury vacations, and jewelry. She was living the high life. I am sure most of us remember the name Gus Gorman. He was the character played by Richard Pryorin Superman III. How did he getcaught? Well, he was stupid. He showed up to work in a new Ferrari. Unfortunately, most fraudsters do not givethemselves up like this and many employers may not even notice. Denise got caught not because of the huge sums of money thatshe was wiring out of the company account into her own, but because she changedher annual salary from $35K to $38K. When the owner of the company noticed this small discrepancy, it was thebeginning of an investigation that kept growing and growing. Like this trucking company, most small businesses lackfundamental controls to prevent and detect fraud. Denise was responsible for all of theaccounting and bookkeeping functions except the physical signing of checks. Denise would periodically wire funds fromthe companys account to her own account. When the bank statements came, she would reconcile them, burying thewire transfers into an expense account and then destroying the evidence thebank statements. Since the owner did notreview the bank statements he was none the wiser. What are some steps that you can take to prevent fraud inyour business? 1) Education: Educateyourself and your employees. You can dothis in house or have a fraud specialist come in and provide the training foryou.2) Internal Control Review: It is critical that all businesses have the proper internal controlsrelative to their size. Depending uponthe size of your company, you may not be able to segregate all of the duties,but you should segregate as much as possible.3) Cash Reviews/Reconciliations: It is important that cash is reviewed and bank statements are reconciledby a party that is not involved in the other aspects of the accounting process.4) Pre-screen Employees: Because of the perceived cost and time involved, many small businessesdo not properly screen employees prior to hiring them. This could include checking workreferences, criminal records, credit reports, drug screening or other screeningprocedures.5) Balance Trust properly. Ronald Reagan called it, Trust, But Verify. Mark Twain said, Trust everybody, but makesure you cut the cards. 6) Seek Professional Assistance. As your company grows make sure that you setup the proper controls tosafeguard yourself. If you are unsureabout how to do this, consult with a professional. There are two things that must exist for an employee to bedriven to commit fraud motive and opportunity. As business owners, we must set up a propersystem of internal controls to limit the opportunity as much as possible. Motive is difficult to set controls around. According to legend, there was a loyalbookkeeper that has been with a Company a number of years. He requested a $100 per month raise and itwas denied. The bookkeeper methodicallystole from the Company for the next 20 years, until he retired. His replacement discovered an amazing fact. The retired bookkeeper had pilfered exactly$100 a month.
Your,Business,Protected,From,F