Bookkeeping Fraud: Is Your Business Safe?

Keeping track of the financial activity of your business is a critical role every bookkeeper should perform. You may have surely heard of horror stories about bookkeeping and accounting fraud, but due to its prevalence, it becomes a regular habit that business owners should get used to. However, just because fraud occurs regularly does not necessarily mean you should not do something to take care of your business.

Identify Signs of Fraud

Misfiled Paperwork: If you have trouble finding business records such as payroll records, deposit slips and supplier correspondence, then you need to ask your bookkeeper to produce them. While it can be easily misconstrued for sloppy filing, you still need to make sure that you are regularly keeping track of your financial transactions. Watch out for government letters about delinquent bills because in this case, your bookkeeper has a lot of explaining to do.

Inconsistent Financial Statement: When there are omissions and misstatement of financial data, it is a clear sign of fraud. While mistakes in data entry can be committed from time to time, when it is done deliberately, it becomes a fraudulent activity especially if it is done on purpose.  As a business owner, it is important you check your financial statement. With that being said, make sure you learn how to read the statement.

Incorrect Procedures: Bookkeepers need to follow correct payroll guidelines and procedures and if they are reluctant to adopt new processes it is necessary that you insist they should strictly follow new procedures. The payroll and financial records for previous years must also be investigated.

How to prevent bookkeeping fraud?

Create a reimbursement and expense policy. Instead of billing your credit cards directly to your company, bill them to your employees. You should also have an expense report for each employee and require them to turn in original receipts. Do not forget to set a daily limit so you will be able to control the amount that your employees spend. With this policy, you will be able to monitor expenses that are eligible for reimbursement.

Review financial records.  One way you can verify that sales are recorded is by keeping a financial record. Make sure the records are complete and if you find out that the customer records are incomplete, you should ask the person in charge of collecting money from customers. There should be checks and balances implemented so debt previously written off are properly recorded.

Avoid sharing passwords. It is common for most people to share passwords especially when separate user accounts are not available. For instance, if an employee wants to make changes to the account, there is no other option but to share passwords. As a result, you have lost control of permission security and unable to determine who made the changes to the account. It is important that Administrator password is controlled by senior management to prevent fraud.

Create a separate account for petty cash: You can easily monitor expenses if you have a petty cash account. This way, the expenses are properly recorded and tracked in a timely manner.

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