Protect your small business by instituting internal controls — Part 2
Donovan Reed, EVP – Chief Lending Officer
We are continuing our suggestions for improving internal controls at your small business with tips four through eight, below. Continue reading from part 1 to read additional measures your small business can take to guard against internal and external predators.
4. Use only approved vendors. A common method of business fraud is to place orders to fictitious companies for materials that are never delivered. Reconciling orders to inventory on a periodic basis can catch this problem, and so can routinely checking your list of approved vendors. Be on the lookout for unknown vendors, those with names that are similar but not exactly the same as an approved vendor, those with no physical address or phone number, and those that match an employee’s address. This can help you avoid billing schemes and phony invoices.
5. Background checks. Perform background checks before hiring key employees, especially those who will handle cash or other high-risk assets. Verify educational and employment history, as well as references, to ensure there is no previous history of fraud or other illegal activity. If possible, conduct a credit check on a prospective employee.
6. Limit access to company information systems. Small business employees inadvertently may be granted more access to company information systems than they actually need to perform their job responsibilities, which can expose your business to additional risks. New employees should start only with the access necessary to do his/her job. As the employee’s workload expands, additional access rights may be granted.
7. Lock it up. Protect all accounting documents by keeping your blank check stock, signature equipment, invoices and critical account information in a safe.
8. Fraud insurance. Contact your business insurance provider to determine if you are covered for employee dishonesty. If not, consider adding a rider to your policy.
For other ways to protect your small business from fraud and theft, don’t miss part 1 of this article.
Sources for this article: burzenski.com, BankoftheWest.com, kaufmanrossin.com, allbusiness.com