There are only two kinds of small businesses in the world. Those that have been ripped off by employees, and those that will be ripped off by employees.
In fact, the average business loses 5% of revenue to fraud each year. A typical fraud case causes a loss of $8,300 per month and lasts 12 months before detection. That’s a loss of nearly $100,000. (source: ACFE Report) Can your small business withstand that kind of loss?
The good news is that you can make your company less vulnerable to fraud. Take the quiz below to find your vulnerabilities.
Fraud Prevention Quiz
1.) What is one recommended action to prevent financial fraud?
a) Change financial access credentials every year
b) Change financial access credentials every three to six months
c) Never change financial access credentials
d) Change financial access credentials every week
2.) Why is it important to periodically rotate employees through different financial roles?
a) To enhance an employee’s skill set
b) To give an employee wider access to detect fraud
c) To prevent familiarity-based fraud
d) To increase productivity while also protecting sensitive information
3.) What should businesses do before assigning financial responsibilities to employees?
a) Conduct background checks and credit checks
b) Give them a raise to relieve them of any financial pressures
c) Review the company’s financial position with them personally
d) Send them to an ethics class, or administer an ethics quiz
4.) Which option is an effective strategy for limiting access to financial information?
a.) Provide annual training so every employee can protect vital information
b.) Allow employees only to access financial information in a secured, physical location.
c.) Restrict access to sensitive financial information to only those employees who need it
to perform their jobs
d.) Assign financial roles only to owners of the company
5. What is a recommended practice for detecting missing checks and preventing check
a) Avoid using checks whenever possible
b) Use sequentially numbered checks and regularly account for all numbers
c) Write checks with a gel-pen that is harder to “wash”
d) All of the above
6. How can businesses help detect unauthorized transactions and maintain financial security?
a) Keep all your accounts with a single bank
b) Outsource the review of financial statements to a third party
c) Use credit cards exclusively to avoid the need for bank statements
d) Personally review bank statements each month
7. How should businesses manage petty cash effectively and maintain financial control?
a) Keep a limited amount of cash on hand and require receipts for all transactions
b) Require employees to reimburse petty cash expenses personally
c) Record transactions in a written journal AND in QuickBooks, just like a bank account
d) a and c
8. What payment method can help reduce the risk of check fraud when dealing with vendors?
a) Use the bank’s bill-pay feature
b) Avoid making payments to vendors without invoices or receipts
c) Use only sequentially numbered checks, printed on a laser printer
d) None of the above
9. What procedure can businesses implement to ensure responsible spending and financial control?
a) Make one person responsible for all financial transactions
b) Set a high minimum threshold for expenses that need to be approved
c) Require multiple approvals for expenses, especially those above a certain amount
d) Use proper Accrual Accounting to record all invoices before making payments
10.) How should businesses secure incoming and outgoing financial mail?
a) Take outgoing mail to the post office, use a locked box to receive mail
b) Chain a guard dog to the mailbox
c) Background check anyone who handles the mail
d) Only send and receive financial statements digitally
How’d you do? (Answers are below).
Remember, avoiding fraud and embezzlement requires a proactive approach. Use these ideas to protect your assets. Then, when a bad apple does try to rip you off, you’ll be ready!.
ANSWERS: 1 (B) 2 (C) 3 (A) 4 (C) 5 (D) 6 (D) 7 (D) 8 (D) 9 (C) 10 (A)
Need More?To continue this conversation with FuseCFO, reach out for a free consultation. We always listen before we answer. And if you’re unsure about your books, ask for our free 1-hour accounting review. There’s no obligation and we’ll give you a written report at the end!