I don’t get it. Each of you works so hard, puts in so much effort, takes great care of your staff but refuse to implement the procedures that will keep your trusted employees from taking things they shouldn’t.
This is not my opinion, these are facts born of research. For example:
- The trusted office manager of Volkswagen of Ft. Myers, BMW of Ft. Myers and Mercedes Benz of Ft. Myers was just arrested for embezzling $250,000 from her employer.
- According to the ACFE (Association of Certified Fraud Examiners), the median business loss from fraud is $175,000 per year.
- ACFE found that 87% of the fraudsters had never been convicted of a fraud related offense.
- In 81% of all fraud cases, the fraudster displayed behavioral red flags associated with fraud: living beyond means, financial difficulties, excessive control issues.
- Almost 75% of fraud detection was the result of tipsters.
There are two sad facts in all these statistics. First, you are always surprised when a trusted employee is found out. And yet that is almost always who it is. Second, if you had just put a couple of small internal controls in place, you probably would not have been ripped off.
Here is my recommendation on what every single business owner should do (as a minimum):
- Separate financial duties. Someone outside the circle should do the bank reconciliation.
- You, the business owner, should periodically review the bank statement. You have intuitions that will help you.
- Set up a statistical sample test to review payments made to vendors. Randomly pull 20% of all payables for a month, or all payments over $xxxx and review all paperwork associated with the payments.
- Phantom payroll is a great place to cheat. Have your assistant verify that every single paycheck for a pay period is really going to an employee of the company.
Each of you has a different set of circumstances. Please give me a call if you would like to talk about setting up a fraud/embezzlement prevention program at your company. Your company and your family are too important for you allow staff to take what is not theirs.