No matter whether your organization is big, small, brand new, or a decade old, every business or company runs the risk of fraud. As the world has progressed in various areas, so have the methods of stealing and fraud. Thieves have become smarter, making it almost impossible to determine if your organization is facing fraud.
Fortunately, there are ways to recognize fraud within your organization by taking a few steps. Such frauds can be costly and devastating to your business, but early detection can minimize the risks. If you suspect your company’s employees of being engaged in fraud, click here to learn more about how you can protect yourself.
Signs of accounting malpractice
- You have less control over the organization’s finances.
When your business sales start boosting, it is common to hire someone to look over the finances so that you can focus on more critical tasks. However, relying entirely on your employees is never a good idea. Internal controls are your defense against employee accounting fraud. In addition to that, you should also consider CCTV cameras, locks, and other physical controls.
- Cash accounts are not balanced.
No matter how you accept payments from your clients—cash, check, or electronically—you must see to it that your cash balance reconciles with the sales and expenses of your business. It is also important to remember that both low and high balances are indications of fraud. A low balance is an obvious indication of fraud where an employee has stolen.
High balances may mean that an employee is trying to make up for past theft. However, such imbalances could also be honest mistakes and mean that your employees need more training in handling cash and funds.
- Inventory shrinkage.
It is uncommon to lose a few items from the inventory while moving them here and there, but too many losses may indicate fraud. You can determine inventory shrinkage by looking at the balance sheet, products bought, products currently in stock, number of sales, etc. It is recommended to conduct unplanned audits to detect any unusual inventory characteristics.
- Customer complaints.
Pay attention to what your customers say. If your customers say that the payments are posted late or are not posted at all, it is a bad sign. Sometimes employees and customers plan the theft together. This is even more difficult to detect since the thieves work together to cover up the fraud.
If you are starting to spot signs of fraud in your organization, you should not wait to take action until it is too late. Call an attorney today.
