When it comes to your finances, trust is everything. Yet, bookkeeper fraud costs the typical organization 5% of its revenue each year. And often, the fraud occurs for 14 months before being detected, causing a loss of $8,300 per month.
And if you want to look at some staggering statistics, check out the Association of Certified Fraud Examiners’ 2020 Report to the Nations — a global study on occupational fraud and abuse. Below are a few to get your wheels turning…
- 42% of occupational fraudsters were living beyond their means.
- The median loss per fraud case is $125,000. The average loss per fraud case is $1,509,000.
- More than half of all occupational frauds came from these four departments: accounting, operations, executive/upper management, and sales.
Surprised by Bookkeeper Fraud Stats?
Maybe, maybe not. But you likely won’t be surprised to hear that fraud is a more significant threat to small businesses than to larger counterparts. This increased threat is due to a lack of prevention, company size, limited resources, and fewer anti-fraud controls. Not to mention the fact that a startup is significantly less flush, making the impact deeper, more painful, and more threatening to the survival of your business.
To Trust or Not to Trust…
When you think about the bookkeepers you’ve hired, did you trust those people? Surely you did if you hired them…but what proof did you have that you could, or better yet, should trust them? That’s where anti-fraud controls and virtual accounting have come into play, diminishing the risk of fraud.
Diminishing Bill Pay and Bookkeeper Fraud With Anti-Fraud Controls and Virtual Accountants
Anti-fraud controls have been shown to produce significant decreases in the cost and duration of occupational fraud. It’s worth it to review your fraud controls. It could prevent thousands of dollars in losses over time. Almost 50% of organizations that have experienced organizational fraud never recover the losses.
We use a strict hiring process that includes pre-employment credit checks and background checks for all virtual accountants, bookkeepers, controllers, and CFOs. In addition, we use processes and technologies to manage employees to remove opportunities that your accountant may have to steal from your business.
How to Prevent Bookkeeper Fraud
How do we prevent bookkeeper fraud?
So these are just two quick tips. There’s no silver bullet, but these things really help. The Association of Certified Fraud Examiners (we follow their reports all the time), demonstrates that most small businesses lose up to 5% of their revenue from fraud. So when we’re thinking about fraud, we want to talk about simple tools that we can use to be able to eliminate it or minimize the risk at all costs. The first one we recommend is LastPass. LastPass is a password management tool and there’s several of them out there. LastPass is one of the ones we use to make sure we’re managing our passwords and we’re not giving people carp launch access.
The second thing that we recommend is for bank access and credit card access. Most banks and credit cards have a view only or bookkeeper access level. So when people request for those things, we recommend giving those access levels to people that are helping you with your financials.
Take-Home Preventative Measures
The lesson to be learned here is cautionary tales tell us that regardless of your company size or industry, we never should presume we’re immune to bookkeeping fraud. The threat is real, but the preventative measures can be incredibly simple:
- Review online banking and transactional accounts consistently
- Reconcile bank and credit card records monthly
- Understand the “roles” your bank allows for online bill pay
- Control and restrict access to check signing and online approvals
- Review payroll details regularly
- Segregate financial duties – that is a fancy way of saying keep the accountants in the administration role and the approvers on the operations side
- Be aware of current cybersecurity threats and the increasing phishing campaigns to protect your business from attacks and identity theft
Acuity’s Practices and People Here to Help
This is why we build our bill pay and expense reporting practices the way we do. In order to implement good practices, we recommend these six partners of Acuity: Bill.com, Veem, Melio, Expensify, Brex, and Divvy – all best of breed bill pay and expense reporting solutions. These technologies allow you to take the administrative part off of your plate as a business owner without taking your authority away.
If you’d like to chat with us about how to protect yourself, the controls we recommend, or how to put these practices into place, click here to talk to our Account Executive Tyler Horn. Click here to pick a time on his calendar and get started today.