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How to Prevent Fraud in Your Business

Many small businesses are tight, family run operations.  If everyone working in the business didn’t start out as family, they usually become family over time.

So why does fraud take place, and how can you prevent fraud in your business?

The main way to prevent fraud in your business is by putting the right checks and balances in place so that the opportunity to steal does not arise.  For small businesses this can be hard because it can add bureaucracy and usually has a cost associated with it.

That being said, most small business owners would prefer to spend a couple thousand dollars each year as opposed to loosing tens of thousands to employee fraud.  Here are four key ways to prevent fraud in your business.

  • Segregate duties
    Ensure that the person making payments is not the same person who is entering invoices.  This can be tough for small businesses, however there are some good outsourced bookkeeping options out there for less than $200 per month (www.bench.co)(Xero Bookkeepers)
  • Bank Reconciliations
    Ensure that reconciliations happen each month, and that the person completing the reconciliations is not the person who makes payments.  Again this can be a good role for an impartial external bookkeeper.  Also be sure to review the bank reconciliations each month to ensure they are getting done.
  • Know your books
    It can be time consuming and frustrating to always be checking your books, but with cloud accounting there are some great products that make it cheap and easy to monitor your books and improve your business (www.mentio.ca)
  • Practice the Basics
    Simple things like having a locked cash box, not pre-signing cheques, and approving invoices before paying go along way to preventing fraud.  Stay on top of your finances and it will be harder for fraud to occur

This blog post was originally published to Mentio.ca in 2015.

About the Author: Michelle Pinchev