Three steps to prevent fraud this Small Business Saturday

I can hardly believe it. Small Business Saturday is nearly upon us and if you’re a small business, like Acuity Forensics, then I know all the love and hard work you’ve put into your “baby.” Our good friends at Veraison Wine Events are experiencing their first year in their new retail shop, and I can see the worry and excitement on their faces. As the holidays approach, you are likely like them – nervous with anticipation. Will customers walk through the door? Will we make our numbers? What if we get too many orders, can we fulfill them in time? Can we maintain quality and service if we get too busy?

It is an exciting and stressful time of year.

In the hustle and bustle of the season, I want to encourage those of you brave souls who have ventured into small business ownership to be mindful of something else. Something that I know you think could NEVER happen to you.

Employee theft.

Before you stop reading, please know that it is not my intention to scare you. It is my intention to empower you with a few simple tools to keep your assets secure, your employees safe in their jobs, and more money in your stocking this season!

According to the 2016 Association of Certified Fraud Examiners’ Report to the Nations on Occupational Fraud and Abuse, most businesses lose 5 percent to employee theft. Small businesses (those classified as having 100 employees or less) are likely to suffer losses of at least $150,000 before the theft is uncovered. What could your small business do with that kind of cash?

Honestly, I never want you to have cause to retain me or any other forensic accountant to investigate losses in your business. I’d much rather meet you as a retailer selling me something special for my loved ones this holiday season. To ensure that happens, here are a few things I want you to know:

1. Employees you trust the most are more likely to be the culprits.

Would you give your money, or the “keys to your kingdom,” to someone you did not like or trust? No, you would not. If you asked my clients on the day before the fraud was discovered to rank their employees from most trusted to least, the fraudster would be in the top three. This statistic is without fail.

Remember, make sure you implement proper internal controls over all your employees, no matter how much you like or trust them. Trust is not an internal control.

2. Cash receipt thefts are more prevalent in small business.

Small business owners are twice as likely to be victims of theft in cash schemes, meaning money is taken from you before it has the opportunity to be deposited to your bank account. The best way to avoid this is to:

·         Ensure all sales are receipted.

·         Disallow employees with cash register access the ability to initiate a refund or void a sale without management approval.

·         Verify receipts are in sequence and receipt totals match funds being deposited.

·         Implement and enforce a cash over/short policy.

3. Simple oversight is your best defense.

I know you are busy. I know you worry about costs and sometimes let things slide because your plate of responsibility (like my plate of Thanksgiving dinner) is full. But implementing financial oversight measures doesn’t have to cost a lot of money or take a lot of time. Here are the top three things I want you to do:

·         Verify daily sales receipts match bank deposits.

·         Review your monthly bank statement and cancelled check images each month without fail (or have your spouse, your CPA or another employee to do this for you). This will ensure that all funds leaving your bank account are for the benefit of your business and not an unscrupulous employee.
·         Ask questions, even when you know the answer! When employees have the perception that you are watching, they are less likely to choose to steal.

Here’s wishing you a happy and successful Small Business Saturday, and here’s wishing your stockings are stuffed with profits from a very successful holiday season. 

Tiffany Couch is founder and principal of Acuity Forensics, a forensic accounting firm in Vancouver, Washington. Tiffany’s new book, The Thief in Your Company, releases on Amazon in early 2017. You can follow Tiffany on Twitter @AcuityForensic.