10 Tips to protect your business from accounting fraud?

These days when the crime rate is on the verge, there are conspiracies everywhere. Many small and even big businesses are more prone to accounting fraud. The consequences of these frauds may lead to harmful situations. When someone does illegal and unethical activities that can lead to financial or statement fraud, it is called accounting fraud. No business is safe these days, accounting fraud is there. According to the old saying, if there is a problem, then there will it’s a solution also. Several frauds can degrade business to a great extent.

What is the meaning of accounting fraud?

Accounting fraud includes fraud which is related to revenue, assets, cash skimming, illegal asset usage, liabilities understatement, and intellectual property loss. Several reasons might lead to accounting fraud which includes employees’ close relation with staff, less knowledge in cash flow. So in this blog, we will discuss how to protect your business from accounting fraud.

So read on the full blog to know the relevant measures that can safeguard the business from accounting fraud.

Payroll process fraud

As we all know, small business doesn’t have more than 100 employees and their chances of fraud in the payroll system prevail. Firstly, When an employee asks for advance payment, providing the excuse that he needs it on an urgent basis and he/she doesn’t return that payback. Secondly, there is an issue of highlighting more number of working hours, instead of actual working hours.

Safeguard measure:- It is better if the company head, divides the duty among the bookkeepers. So that every detail gets checked. Aso, it is better to evaluate employee background once before hiring them.

Isolate Accounting Duties

In small business, we have seen that they put on work only one employee for carrying out various bookkeeping activities. There are a lot of activities like client’s payment processing, client receivables, payment of invoices, management of cash and maintain the entire record in the accounting system. In this case, due to one person as charge, the chances get doubled of having any fraudulent activities. These frauds are not even noticed also.

Safeguard measure:- Here, we should suggest, deploy at least two people for accounting. So that their activities can be managed. Another thing you can do is outsourced any CFO(Chief financial officer) who performs every accounting activity delicately.

Uphold Internal Controls

There should be an authority at every level. Every business needs control. Controlling can prevent fraud.

Safeguard measure:- There should be timely auditing for accounts. This adds limiting access to accounts for some specific persons.

Keep your eye on Employee background 

Every business wants to recruit honest employees. It is necessary to check the entire background details of the employees.  Some companies hire employees on an urgent basis and forget to check their details. It can create issues. Sometimes, it can lead to tremendous accounting fraud.

Safeguard measure:-  Before hiring, it is necessary to perform regular background checking regarding what was an experience, how was the behavior in the past work, what is regarding the character certificate.

Examine Business Bank Accounts.      

With the advent of online banking facilities, it becomes quite simple to visualize the accounts activity as well as the statement. But it is a dire duty of the management of business that they have to check regularly the paperwork of statements. They should check that the statement doesn’t get manipulated.

Safeguard measure:-  Along with online management, there should also be paperwork activity to mitigate the frauds.

Regular auditing of accounts

Management should take care of regular auditing. It helps in knowing the areas which include accounting departments.  Various accounting departments like refunds, cash, inventory management should be checked.

Safeguard measure:- There should be regular auditing like non-scheduled audits. These assist in fraud detection. It is better for high-risk areas.

Incorrect invoice issue

The fastly growing fraud in accounts is also due to the issuance of incorrect invoice issues. Sometimes CPA shows a high amount on the invoice of the vendor. This will insist you give more payment. In case if you are a small business owner, you don’t possess that much time to check them every payment. Sometimes you pay more. This way CPA sidetracks the payment in some substitute account.

Safeguard measure- Every businessman should possess obligatory information concerning the expenses of the vendor. For this, you have to keep the vendor list with you. There you need to cross-check all the associated supplier’s name to whom you have to recompense along with the expanse.

For avoiding the illegal actions by CPA, this action is mandatory, it can frighten the CPA. This will illegal action can be mitigated.

Safeguard Credit Card Info– Avoid Accounting fraud

Fraud in credit cards is very much prevalent these days. Many people circulate funds related to business that can create so many issues. This way chances are high that credit card gets hacked or info can be breached. This can lead to accounting fraud.

Safeguard measure:- Small to large business must take care of the expenses and don’t share their credit card info with anyone. This will eliminate accounting fraud.

Proper knowledge of business partners

When you enter into some business, one day you wish to expand it. For expanding you may associate with other people. But before making anyone involved in your business, you should keep searching a full proof knowledge about their business as well. During business partnering, there are big deals between two parties, and cheques are passed. So it is better to know the entire details.

Safeguard Measure:-Before partnering with another,  you should know their physical address. Keeping the entire details about them can safeguard you from any big fraud.

Seek Assistance from experts

If any business has followed the above-stated steps but still the fraud rate is not declining, then it is the time to seek help from experts.

Safeguard measure:- Hire expert either outsourcing for detecting the vulnerable areas which are getting more prone to frauds.

Final Thoughts

Crimes and fraudulent activities are never-ending, but yes these are controllable. You should safeguard your business from criminal activity and accountancy fraud. In this blog, I have discussed how to protect the business from accounting fraud. I hope this works for you. If still feel any doubt, kindly ask me in the comment section.