The CEO’s Guide to Fraud Prevention

When you started your own company, weren’t you mindful of what happens to almost every dollar, paying every vendor payment and making every deposit? Did you find that every employee had a different relationship with your money and brought their own style of management, in lieu of existing processes and controls that directed them otherwise?

According to the Statistic Brain Research Institute,, the fortunate 66% of business owners who make it past the three-year anniversary mark are most likely working on their business and not in their business. At this stage of company growth, the CEO should be making decisions about controls and processes for cash management. When you research how to monitor the cash process, you may be confused and overwhelmed by a need for controls requiring additional employees you cannot afford, complicated bank services and useless data instead of helpful information. The result may be that you opt to completely trust an accounting staff member to manage the day-to-day money and finances with little to no oversight, placing your company at risk of internal fraud. However, as the owner, you are missing crucial information to “right size” the controls and information you should be monitoring. The perpetrators of fraud often rationalize their choices by telling themselves, “No one pays attention to what I do anyway.”

Here are six fundamental checkpoints you should conduct to feel assured that the controls and processes are in place and being followed:

credit report

  1. Walk around your accounting office in the morning at least once a quarter. As you greet employees, note what paperwork is on their desk. You may find unendorsed checks, receipts for unexplained purchases or blank checks lying around. Any of these items can indicate a problem with control. Checks should be endorsed as soon as they come in the door and deposited within three days, receipts should have clear information about what they are for and blank checks should be locked up at all times.
  2. Review your bank and credit card reconciliation at least semiannually. Review all transactions for reasonableness, compare the balance on the statement to the reconciliation and make sure the payment on the credit card statement agrees to the payable information in the accounts payable general ledger data.
  3. Ensure that sensitive and confidential information you do not want laying around is locked up securely.
  4. Order and review your company’s credit report at least once annually. Make certain you are aware of all credit card statements related to your business that are outstanding.
  5. Use Positive Pay, a commercial banking service that matches account numbers, check numbers and dollar amounts of each check presented for payment against a list of checks previously authorized and issued by the company. All three components of the check must match exactly or it will not pay. This requires you to send the data to your bank each time you run checks, and you will have to pay the bank monthly fees for this service. Thehe time and energy spent on this service are well worth it as a deterrent to check fraud.
  6. Develop controls for your accounts payable processes that are appropriate for the resources you have available. These may include processing checks one day a week rather than on demand; formalizing the travel expense approval process using expense reports; reviewing who approves expenses in each department, and considering software applications such as Expensify, or Concur to help automate processes.

These six checkpoints apply to all businesses and are easy to implement with minimal involvement from you. Fraud is embarrassing and difficult to communicate to your investors, bankers or other stakeholders that have provided cash for your business. Invest the time on the front end to monitor and prevent fraud so you don’t have to pay for it after the fact.

Mindy Barker founded Mindy Barker & Associates in 2012, to provide entrepreneurial business owners and non-profits with Fortune 500-level CFO management and consulting services, enabling her clients to maximize efficiency and profitability. As CEO of Mindy Barker & Associates, Mindy works to empower her clients with the tools and financial information necessary to improve company value, profitability, and cash flow.

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