Prevent Fraud in your Business

published January, 2009

Don’t let someone sign your name, use your credit card or represent themselves as you to your bank or credit card company—in the event of fraud, it muddies the water between what you allowed them to do and what they did. If you authorize someone sign your name some of the time, how can a jury decide when you didn’t authorize it?

I’m afraid you can’t abdicate bookkeeping responsibility entirely to one person. There’s a rule I think of as “separation of church and state” – have one person reconcile and another person write checks. 

Open your bank and credit card statements and review the checks and statements. If someone is stealing from you, better to catch it sooner. I don’t mean review the stack of checks the bookkeeper lays out for you after reconciling, I mean open the envelope yourself. If you’re a bookkeeper, make the owner open the statements and initial them, if you can.

Reconcile your accounts monthly. The one time I personally discovered fraud, an exiting employee had written themselves a few ‘extra’ checks, presumably because the soon-to-be-ex-employee felt the employer owed them. As I recall, this ultimately cost the employer $50, which was much better than the thousand or so spread across several checks, also presumably to make it look like a few ‘normal’ checks.

Back up your data off site in a secure way. If you’re using CD’s use the read-only variety. The last action of a fraudster before leaving is to delete all the QuickBooks files and backups, and/or change all the passwords. It may be possible to recover deleted files from a hard drive, but it’s very expensive.