Stupid Tax

#23 - Fraud Controls: How to Stop People Stealing from Your Business

Feb 12, 2024

Learn how to prevent fraud in your business with effective fraud controls. Topics include the importance of regular bookkeeping, monitoring invoices, and restricting check-writing permissions. Real-life examples highlight the consequences of tax fraud and the deceptive methods used by scammers in business finances. Practical strategies are shared to safeguard against financial loss and maintain trust with customers.

01:25:27

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Quick takeaways

Regularly review financial records to catch fraud early on.

Maintain personal oversight of business finances to prevent fraud.

Implement stringent fraud controls like unique transaction IDs and automation.

Deep dives

Importance of Clear Communication and Accountability in Business Operations

Maintaining clear communication and accountability in business operations is crucial to prevent fraud. Having strong internal controls such as defining roles clearly and segregating duties between different employees can help in detecting and preventing fraudulent activities. For instance, issuing purchase orders and utilizing procurement management software can create a trail of accountability and prevent fraudulent schemes like inflating invoices or misappropriating cash.

Introduction

2min

Humorous Banter About Accountants and Crypto Troubles

2min

Detecting Fraud and Implementing Controls

6min

Tax Fraud Consequences: Bank Caught in Legal Crossfire

3min

Exploring Fraudulent Schemes in Business Finances

2min

Effective Price Increases and Contract Structuring for Service Businesses

3min

Preventing Fraud and Ensuring Business Ethics

22min

Preventing Fraud Through Strict Controls and Monitoring Processes

21min

Managing Fraud and Misconduct in the Workplace

21min

10.

Implementing Fraud Controls in Business Operations

3min

Hang around a group of small business owners -- folks who have been in the business for a long time -- and you'll find that nearly every one of them has had someone steal from them or commit fraud at one time or another. Small businesses are prime targets for fraud and theft, mainly because they tend to have weak or ineffective fraud controls, if they have any at all! It's imperative for any small business owner to understand common fraud risks and develop some basic processes to ensure they don't happen.

The most common reason people get away with unchecked fraud and theft is because the business owner is simply not paying attention to his accounting. The books aren't reconciled often enough, invoices are not reviewed regularly to ensure they match revenue, and too many people have deposit and check writing permissions for the business. As Scott says, the only other people that should have the ability to write checks for the business, besides you, the owner, are your wife (husband) or your mom.

Having a bookkeeper is great for getting insightful reporting on your business, ensuring your books are done on a regular basis, and your taxes are filed stress-free and on time. But you, the owner, still need to personally review the books on a weekly basis, check the invoices, and maintain a list or database of your contracts, so that you can catch any funny business before it snowballs into a very expensive problem for your business. There's no substitute for being in touch with your business' numbers, even if you have someone else doing the dirty work of categorizing transactions and reconciling bank accounts.

Ask Mitchell and Scott a question:

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Mitchell Baldridge

Twitter: @baldridgecpa

https://baldridgecpa.ck.page

https://baldridgefinancial.com

Scott Hambrick

Twitter: @hambrickscott

IG: @ogscotthambrick

https://onlinegreatbooks.com

https://scotthambrick.com