Over twenty years ago I graduated college with a BS in accounting. Nine years ago, I completed my MBA. With the exception of the last three years, I have held positions in accounting departments of various organizations.
Basically, everything I learned in college became a way of life for me. Checks and balances are second nature.
Since 2006 I have worked for public accounting firms and recently started my own business.  I am surprised to learn that some small businesses do not handle their bookkeeping properly. I was also surprised to see that many did not realize the importance of internal controls. This is really foreign to me because my favorite course in the MBA program was controllership.
Most of my current clients are business owners with no employees, but not all of them. Recently one client discovered that one of his employees was not trust worthy. Such betrayal is not a good feeling. Small business owners often suffer a greater risk of fraud because they do not believe they are at risk. Many small business owners think because they are “small” that they are all friends. Older, better educated, long term employees may be more trusted and so they may have more opportunity to commit fraud. The unfortunate truth is that any employee might yield to the temptation of stealing if the proper controls are not in place.
In our economy with high unemployment, high medical costs, mortgage issues, a trusted individual could be pushed over the edge. The median fraud loss suffered by organizations with less than 100 employees was listed at $ 190,000 per scheme in the 2006 report by the Association of Certified Fraud Examiners.
In order to prevent becoming a victim of fraud, small business owners need to establish internal controls, conduct surprise audits, establish a code of ethics and display it prominently. Internal controls mean separation of duties, written policies and procedures that are followed and updated often. Watch for red flags and investigate promptly. A good accountant can help set up internal controls.
