During my 25 years of bookkeeping, I have come across several instances of fraud and was surprised that fraud can happen to ordinary, unsuspecting, business owners. As a business owner, you are busy running your business, managing day-to-day operations, securing and preserving customer relationships, and paying your bills. Fraud and theft are often the furthest thing from your mind. And, yet it would not be beneficial to spend all your time worrying about the possibility of fraud and theft, looking over your shoulder in suspicion; this could easily steal all your time from your actual business.

So, what can you do to protect your business from fraud without it taking up all your time? Below I have outlined a few simple and straightforward rules you can put into practice to help. Let’s take a look!

1. Separate reconciliation from signing authority.
Most business owners delegate the financial activities of their business over to their controller/bookkeeper, granting their them signing authority on the business account. In addition to this, they often handle the deposits and reconcile the bank. That is a lot of power for one person to have over another’s business. For example, three years ago, I heard of an employee with signing authority writing unauthorized cheques to herself for over a year before she was finally caught. To prevent yourself against theft such as this, I recommend that the person who handles your bank reconciliation is not the same person who has signing authority on the bank account. This rule alone will remove the opportunity for one person to abuse their power.

2. Know your business transactions.
I also encourage business owners to review their bank statements, specifically looking at the cashed cheques and payments to invoices. As a business owner, you should be familiar with your typical transactions throughout each month; enough that, with a brief glance, you can catch anything out of place such as fraudulent invoices. An example of fraudulent invoices occurred for a larger company that spent several millions annually on Cost of Goods Sold. The authorized controller – someone who, incidentally, also had signing authority on the bank account – decided to create fake invoices for alleged goods received and paid himself the invoiced amounts. He created a fake company name in the accounting system and used his signing authority to approve invoices that were under a certain threshold, allowing him to slide under the radar. Although he was eventually caught, the business owner is still trying to recover the stolen amounts.

Know your accounts, know your customers, and, again, separate the signing authority from the bank reconciliation process.

3. Be aware of typical CRA procedures to prevent you from being caught in a scam.
Phone scams. We have all heard of them. We are cautious. Still, people get caught up in fraudulent calls and emails that allegedly originate from the CRA. Most business owners dread phone calls from the CRA and want to comply as quickly as possible. Not so fast! First you need to verify that you are indeed dealing with the CRA. The CRA will never:

• • Call you to demand immediate payment by interac, etransfer, bitcoin, prepaid credit cards, or gift cards;
  • Call you to threaten you with immediate arrest or police showing up on your doorstep;
  • Ask for personal or financial information via email;
  • Ask you to click on a link;
  • Text you…as in, they will NEVER send you a text to your cell phone;
  • OR ask you to click on any links promising a refund – that’s a scam as well!

Ignore, delete and block any numbers you receive calls or texts from as described above! If you are speaking to a CRA agent and you doubt their identity, ask them for their name and agent number then hang up and call the CRA business number back (1-800-959-5525) and request to speak to this agent.

3. Review your credit card statements and require receipts for each purchase.
Employee theft can be as harmless as an employee using your postage machine to stamp a personal envelope or absent-mindedly pocketing a pen or two. More serious infractions of employee theft often occur when an employee has access to a company credit card for business-related purchases. Many times, it may be an honest error where the wrong credit card is used for a personal purchase. If you require receipts for each purchase they make, then your employee will likely identify and rectify any accidental charges. As well, formal review of your credit card statements alongside the matching receipts can assist you in detection of employee theft.

Welcome to the digital age – receipts no longer need to be stored and submitted in-person and in paper form. It is as easy as the employee taking a picture of the receipt at time of purchase, and then submitting it directly to your accounting system.