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Breaking the Fraud "Triangle" in Your Business

According to the Association of Certified Fraud Examiners (ACFE), fraud occurs in the workplace when three elements exist: pressure, opportunity and attitude.  Pressure can exist when employees are experiencing a financial hardship.  Opportunity may be present when there is lax oversight or weak internal controls.  An attitude that "everyone does it" or "just this once" can provide the rationalization to an employee to initiate and perpetrate a fraud.

To effectively control or minimize fraud, employers and business owners must be vigilant in their efforts to "break" one or more of the three elements that are conducive to fraud.  Why is this so important?

In their recent annual survey the ACFE noted the key results of their survey:
  • The median loss figure for workplace fraud is $160,000
  • 80% of frauds involved the misappropriation of cash
  • Nearly a quarter of all workplace frauds originated within the accounting function

With that as a background, here are some simple steps to take to protect your business:

Step #1
Segregate steps in your internal accounting processes among different employees.  For example, the person who handles accounts receivable should not be the same person who makes the daily bank deposit.  One simple procedure is to have the monthly bank statement mailed to the residence of the business owner.  The owner should take a few minutes to thumb through the checks looking at signatures and endorsements.  This sends a strong message from the owner to the person preparing the bank reconciliation that "I'm watching".  If you think your office is too small to break-up duties, we can show you how it is done when there are as little as 2, 3 or 4 employees in an office. 

Steps #2
Only sign checks when the supporting invoice is attached or readily available.  Never, ever sign checks in blank.

Step #3
Cross-train employees if possible, and require employees to take vacations.  While the employee who never takes a vacation or sick day may seem ideal, they might also have a reason to stick around so closely.

Step #4
Keep in tune with your employees' personal lives.  Divorce, medical bills or an unemployed spouse could become sources of pressure for an otherwise well-intentioned employee.

We believe the vast majority of employees are honest and come to work trying to do their best.  However, external pressures and internal temptations can sometimes cause employees to drift over to the "dark side".  It is incumbent on employers and business owners to remove temptations and monitor those pressures. 

That protects everyone!

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762 W Eisenhower Blvd
Loveland, Colorado 80537

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1212 Graves Avenue
Estes Park, Colorado 80517


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21398 Provincial Blvd
Katy, Texas 77450

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