Tuesday, January 31, 2023

Asset Protection

7 ways to secure your business from misappropriation of funds

By Ebony Chappel

Rosilene M. Taylor
Rosilene M. Taylor

FROST ILLUSTRATED, FORT WAYNE’S OLDEST weekly newspaper, was dealt a horrific blow in October of last year when it discovered that a thenemployee, Rosilene M. Taylor, had forged checks she’d stolen from the owner’s office. At the end of Taylor’s spree, the paper was out more than $5,000, not including overdraft fees, and it  accounts had been frozen.

In an interview with the Journal Gazette, Frost Illustrated owner Edward Smith said the future of the 45-year-old publication, which serves Northeast Indiana’s Black community, was uncertain.

“We’re trying to save this,” he said.

The most recent estimates from the Association of Certified Fraud Examiners’ Report to the Nation show a typical organization loses 5 percent of its revenues each year to internal fraud. Losses are compounded for small businesses, which according to a study by the Association of Certified Fraud Examiners, suffer the largest median losses.

Xin Liu, a senior accountant at Calumet Specialty Products Partners, a leading refiner and processor of specialty hydrocarbon products  headquartered in Indianapolis, said small or midsized business can benefit from keeping a close eye on employees.

“In cash-related jobs, no one person should be solely responsible,” she said. “No one should be doubted, but no one should be totally trusted either.”

Liu also suggests that employers use some form of rotation with the responsibilities of employees who handle the company’s money.

“A lot of cash-related jobs are forced to take days off,” she said. “When someone else from the department does the work, they may find gaps.”

Here are seven additional ways to protect your business from loss:

  1. Conduct Random Checks. Follow up with customers and clients on invoices to make sure what your financial records show is accurate. Also, do periodic confirmation on accounts payable and accounts receivable.
  2. Don’t have too many hands in the cookie jar. Limit the number of employees who are authorized to conduct financial transactions. Make daily deposits to the bank yourself to prevent anyone potentially slipping $20 in their pocket when no one is looking.
  3. Don’t replace your John Hancock with an ink or electronic stamp. Signing every check yourself is a great tool in preventing misuse of funds.
  4. Perform background checks. It seems like a Captain Obvious-esque request, but all employees should be subject to preliminary background checks.
  5. Use bank alerts. Many banks offer alerts that come directly to your cell phone and email. Liu suggests that employers not only utilize them, but keep employees out of the loop. No one likes to know they’re being watched but it may be your best line of defense.
  6. Keep your eyes open. According to the AFCE, 81 percent of fraud perpetrators displayed behavioral red
    flags that are often associated with fraudulent conduct such as living beyond their means, financial difficulties, unusually close association with vendors or customers; and excessive control issues.
  7. Get a second opinion. If you suspect issues, have an outside accountant come in and go through the books. Their findings may surprise you.
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