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Going Going Gone

By Donna Stone, Stone Consulting

Owning a small business doesn’t mean you’re safe from predators.

It’s not only large faceless corporations that experience theft and fraud - every business can. Whether it’s tools, stock, money or time we’re all susceptible. 

In fact, small business is more vulnerable because there are usually no checks and protective systems in place and one person is often doing many of the duties.

Prevention doesn’t have to be complicated or expensive; it just requires some thought and pro-active attention to your business. 

n Have clear policy so that staff know that there will be no tolerance by the business of theft or fraud. Be transparent that you do have checks in place. Lead by example and be honest in your dealings.

n Rotate staff and their duties. Ensure your staff take regular annual leave.

n Have appropriate segregation of duties, i.e. purchase versus payments. When one person does it all, that’s when opportunities arise for dishonest staff to act. 

n Have a reconciliation process, cash register dockets etc. Ensure when you deal in cash, e.g. retail, that the banking reconciles to the till dockets or taking sheets.

n Have suitable authorisation procedures i.e. cheques, purchases etc.  

n Computer Systems should be used by authorised personnel only. Does your system have ‘warning bells’ such as credit limits being reached?

n Assets, inventory and stock are tracked and regular stocktakes occur.

n Conduct a random audit - even if informal. Watch bank movement. Trust your instinct or have an independently review by someone external and experienced, such as your Accountant.

n Have suitable reporting. Watch debtor and credit listings and other reports, such as Profit and Loss, Balance sheet etc. Review regularly and frequently.

n Ensure your books are up to date; if they aren’t current how can you possibly find anomalies?

n Be proactive - personally look at your books and bank statements. Ask questions and don’t feel uncomfortable. Any qualified, professional and honest bookkeeper or employee will encourage and support owner review. 

n If you seem to never have any cash, but the business appears to be doing very well - INVESTIGATE. 

Some ideas are to:

Liaise with your suppliers personally to check all is ok.
Look for large, or numerous sale of purchase credits.
Look for supplier names or employees you don’t recognise.

Some examples of fraud I have personally experienced include:

n Bookkeeper sent letter to suppliers providing new bank details - her’s! AMOUNT STOLEN - UNKNOWN.

n Bookkeeper paid fake invoices to fake suppliers - except bank details were her own. AMOUNT STOLEN - $400,000 +.

n Bookkeeper made payments for real suppliers but instead of paying them - the funds went to her bank account. AMOUNT STOLEN - $100,000.

n Bookkeeper kept the cash receipts, saying it was paid via credit card on the invoices. AMOUNT STOLEN - $250,000.

These are extremes which the diligent business owner will avoid with a little common sense and involvement. The majority of bookkeepers and staff are basically very honest, however, be prepared for the occasional ‘bad apple’.  

Author: Donna Stone
Business: Stone Consulting
Donna began manual bookkeeping in 1983 and has been doing MYOB consulting since 1995. She has provided formal group training sessions as well as hundreds of 1-on-1 training sessions. Stone Consulting started in 2000 and today has a solid team of dedicated workers. Donna’s experience includes large Chartered Accountancy firm Price Waterhouse Coopers.