How outsourcing your accounting can help protect you from fraud

To prevent fraud in your small business, make sure from the beginning that more than one person handles all your essential bookkeeping and accounting functions.

No matter how busy you are as an owner, if your company is just you and one other person, you need to have in place protocols from the start that protect you and your firm.

In an earlier article, we looked at some of the common frauds that victimize small business owners.

Today we will look at some steps that can be taken to avoid these issues.

One of the easiest ways to protect yourself as a small business owner is to outsource your accounting to ensure your finances are handled by professionals who are properly trained and have anti-fraud protocols in place to protect you.

When you adopt that that strategy, there is another bonus as well. You have accurate financial data at your fingertips when you need it. This up-to-date financial reporting allows you to make better business decisions and be actively engaged in advance planning to give you the most tax advantages when tax season approaches.

At Piligrim Accounting which services clients in Richmond where we are based as well as across Canada, we are accustomed to working with smaller enterprises that are just getting started or going into a growth phase and need to ensure that their financial records are accurate and that nobody is taking advantage of their businesses to scam them.

Many come to us suffering from the pain of knowing a person they trusted betrayed them or realizing they lost valuable tax claims because their books were kept incorrectly.

In addition to fraud prevention, expertise and accuracy, and allowing owners to focus on the key tactic of growing the business, clients tell us they stay with us because it is cost-effective, and they appreciate the consistent reconciliation and backup.

However, if you are doing everything yourself and your business has just yourself and one other person, you can still take steps to protect yourself. One of the best ways is to break down the duties strategically so you can be aware of all financial aspects.

Assign your employee to write and mail cheques, receive cash, approve payroll, record accounts receivable and general ledger entries and authorize purchases, cheque requests and invoices.

Keep these duties to yourself: Receive, open, review, and reconcile bank statements. Perform bank transfers, reconcile petty cash, sign cheques, fill out deposit slips and make deposits and distribute payroll.

Here are nine other tips to help prevent fraud in billing and other areas of your business:

1. Use purchase orders and match them to invoices.
2. Unhook the duties of bank reconciliation and bill payment.
3. Use electronic bill payment that offers a built-in workflow.
4. Establish and regularly review an approved supplier list.
5. Ensure that the owner is the only person to have access to the bank statement and to view cancelled cheques.
6. Compare the payee in QuickBooks to the cancelled cheques.
7. Switch to electronic cheques to ease the paper burden.
8. If a supplier asks that money be wired to them electronically using a money transfer service like MoneyGram or wants to use cryptocurrency such as Bitcoin, be careful. Remember that when you send a transfer through these services that it is the same as cash and once the transfer is made, it is virtually impossible to get it back.
9. Be careful about accepting friend requests on social media from people you don’t know until you review their profile and ask your friends if they know them. If you can’t verify that they are legitimate requests, delete them.

Certified professional bookkeeper and certified tax specialist Elena Ivanova is managing director of Piligrim Accounting Inc., a national accounting and tax preparation service based in Richmond Hill, Ont. You can reach her at elena @ piligrim-accounting.com.

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