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It is unfortunate for business owners that there are a large number of bookkeeping fraud stories available on the web. Fraud is especially damaging to small businesses, and statistics show that on an average a case of fraud is active for 18 months before it is detected. That is plenty of time for financial and data losses to occur. And 40-60% of companies are not able to recover any fraud related loss. Thus, keeping a check over your accounts is of utmost importance. Using cloud hosted QuickBooks for accounting purposes can help you monitor records and check if they are being tampered with. Hosted QB Premier version is a great way to observe the work of a suspicious employee by accessing the software remotely.
Why Does Fraud Happen?
There is no specific answer or reason as to why somebody commits a fraud. Surveys tell us that 90% of fraudsters are first-timers who have no previous record of any crime. Accounting, Operations, and Sales departments are the most vulnerable as 76% of reported fraud cases are of employees from these departments. Many CEOs of small businesses believe that they would have a gut feeling if something was wrong, or they have too strong core values for any fraudulent activity to happen. This is like just giving an opportunity for stealing. Blindly trusting your employees is never a good idea.
It is imperative to take measures and prevent this from happening. The most fundamental way to reduce the risk of fraud is to set up internal controls. Understand that no amount of prevention completely waives the risk of criminal activity. All you can do is make it harder for fraudsters to steal your money or put measures in place for them to get caught early and minimize the damage. If more than one employees are involved, it will be more difficult to notice, but not impossible.
Below are three ways that can help you reduce the risk of fraud in your business:
1. Separation of Duties
The foundation of a strong internal control system is segregating duties. This involves dividing crucial duties, which deal with accounts and sensitive information, between two or more employees or departments. The roles must be well defined. For example, one person can be in charge of receiving merchandise, while the other person is in charge of taking orders.
2. Control over Access
Limiting a bookkeeper’s access to signature stamps, blank checks and cash is one of the basic ways to prevent embezzlement. Conducting surprise audits on a regular basis to detect any discrepancies or theft. These are a few ways to stay ahead and catch the action before it costs you a lot of money.
3. Systematic Approach
Most companies want to establish fraud prevention practices that don’t cost a lot. In QuickBooks, there are a lot of built-in features that let you set up limitations and authorizations. Bear in mind, never default, everyone, full administration rights and authorize employees according to duties. It is never too late to customize your settings and permissions. Hosting QuickBooks in the cloud enables you to access your books remotely and monitor your accounts.
Majority of bookkeepers are ethical and efficient in their job. But being cautious about your business is essential. Recognizing early warning signs of human behavior and applying fraud prevention strategies will help you save time and money.