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WORKING SMARTER EVERY DAY

THE BEST DEFENSE...
IS A GOOD DEFENSE

Take a look at your security plan. Do you...

Use change orders to document what changes were made to a job, and why? When possible, have the client sign off on them to keep extra job costs in plain view.

Use the automatically-numbered POs in Clients & Profits? That way, every committed cost can be matched back to an invoice. Print a PO log to find any inconsistencies.

Always require that POs have an actual—and accurate—dollar amount? This will prevent sneaks from tacking on extra costs (and keep vendors from overcharging you, too).

Use prenumbered safety checks? Any out-of-sequence checks that show up on your bank rec are a big red flag.

Always have expense reports approved by a manager, and double-check expense amounts against receipts? Financial fraud includes dining on the company dime (when it’s not company time), too!

Add clients payments and vendor invoices as they come in? This will minimize swings in A/P and A/R balances, making misappropriated financial transactions more apparent.

Spread financial responsibilities around? You’re setting yourself up for a loss when only one person enters A/P, writes checks, and balances the accounts. Give many people limited access to financial responsibilities—and check up on the books yourself.

Talk to clients and vendors about recent jobs? It will be easier to verify billing and payment amounts if you have a good relationship with them.

By Judy Salkind

Here are the facts: Small businesses, especially those with fewer than 100 employees, are especially vulnerable to embezzlement. And it’s usually an inside job.
Why? In small businesses, everyone wears more hats. With less segregation of duties, it’s easier to hide the crime.
And, chances are, your agency feels a lot like family—full of people you like and trust.
Maybe there is no reason to suspect anyone (and you probably don’t want to), but nothing is people-proof. Use these deterrences, because you’d hate to learn the hard way that you should have been suspicious.

Surprise! Do unscheduled cash audits to uncover any cooked books.

Have financial information mailed to your home instead of the office.

Make everyone take an annual vacation, and don’t let their work sit until they return. When someone else picks up responsibilities, interesting things always turn up.

Separate financial responsibilities. The person who adds A/R shouldn’t also add and sign checks or do the bank rec. Still another should pick up the mail. Better yet, have all of your financial statements mailed to the principal’s home address.

Talk to clients and vendors to ensure that payments are being made. (Think of it as a schmooze opportunity.)

Scrutinize expense accounts and reimbursements. (One exec tried to deduct the same steak dinner three times. Busted!)

If you catch someone in the act, prosecute. It may be painful—especially if they were a trusted employee—but it sends a loud, clear message to everyone else. It hurts to think that people you trust might try to take advantage of you. But it would hurt even more to lose a life’s work to a greedy, soon-to-be ex-employee.

Judy Salkind is a senior member of the Clients & Profits Helpdesk.

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