Watch Your Company's Finances

It's not that you can't trust your employees. Considering we've reached 1997 financial crisis levels, people become desperate. They have bills to pay and a lifestyle to upkeep. This doesn't mean they're trying to maintain their BMWs and $1 million dollar homes. Instead, they struggle to help their kids with music lessons, sports and other extracurricular activities.

It's a case of desperate times calling for desperate measures. Fight or flight syndrome. Survival of the fittest (or weakest).

The Association of Certified Fraud Examiners has conducted a survey of fraud activities occurring between January 2006 and February 2008 at companies with fewer than 100 employees. The survey reports that the frequency of billing, check tampering, corruption and skimming occurs over 20 percent of the time in small companies.

Other fraud activities include expense reimbursement, cash theft, cash larceny (stealing cash after accounting for it), equipment theft, payroll and fake financial statements. These occur between 12 and 15 percent of the time.

This doesn't mean your employees are untrustworthy. It's wise to keep an eye on your company's finances. Make sure you get a deep enough look because one company's bookkeeper had access to all of the company's accounts. So the owners would see no problems when reviewing the finances.

When fraud occurs during a difficult economic climate, owners naturally think sales are down rather than that something is going on within the company's walls.

Whether proactive or reactive, small business owners need to take steps to protect themselves and their cash flow.

Here are suggestions of steps to take in protecting your finances:

• Don't rely on a stamp with the owner's signature.
• Have bank and credit card statements to the owner's home.
• Send all credit card charges through the owner.
• Review bank statements for unusual amounts and transfers.
• Review all canceled checks and their signatures.
• Conduct background checks on new employees.
• Create paper trails.
• Put a system in place for checks and balances.
• Use free financial resources.

Educate your employees on cyber crime, how to protect themselves from phishing and giving away personal information to crafty criminals. A criminal can simply call an employee claiming to be tech support and request the employee's sign in information to "fix something."