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Prevent embezzlement and fraud in your business

On Behalf of | Apr 24, 2023 | Fraud

California business owners and managers have many priorities to manage, including protecting the company from embezzlement. The crime of embezzlement involves an employee or other trusted party stealing assets or money that belong to the business. This fraud can damage your company’s operations, financial stability and reputation. However, you can take steps to protect your company and stop fraud before it happens with the following steps.

Make daily deposits and check balances

One of the best ways to prevent individuals from embezzling is to deposit business cash and checks every day. Additionally, keep the company’s check register reconciled and account for all missing or uncleared checks regularly. Conduct monthly financial checks, including bank account reconciliations and expense tracking, so that you can spot any unusual activities or business fraud early.

Watch your employees

While trust is essential to employee relations, tactfully make your employees aware of your company’s policies of checks and balances to prevent embezzlement and other fraudulent activities. Take extra care with employees accessing company financial data and accounts. Take notice of any changes in an employee’s status, such as being in financial distress or sudden new, extravagant purchases.

Implement internal controls

Separating employees’ duties in accounting and money-related transactions can safeguard against business fraud. Separation of duties includes internal controls such as having two required signatures for every check issued over a certain amount and designating a non-check signer as the only individual allowed to write company checks other than the owner. If the company signs checks with a signature stamp, keep it under a separate lock and key from the company’s blank checks.

Implement other controls for accounting employees who enter transactions into the company’s accounting software by having an approval process in the software to prevent employees from entering fraudulent transactions. Each employee should only be able to perform some parts of a transaction, from entering an invoice to creating, printing and signing the check that pays the invoice.

Track petty cash

Petty cash is a common way employees can embezzle money from a company. Keep petty cash in a secure place, keep detailed records of all transactions, and have strict policies and procedures for requesting and using it.

Perform background checks

Conducting background checks before hiring new employees can help spot any red flags or uncover previous embezzlement incidents. Additionally, verify employment and education history to help ensure that you are hiring a trustworthy and honest individual.

Implementing proper controls and regularly reviewing the company’s financial data can protect your business against embezzlement.