Here’s What to Do Next and How to Prevent It in the Future
Discovering – or even suspecting – internal fraud can be unsettling for any business owner. While small and mid-sized businesses often operate on trust, it’s critical to have a plan in place when something doesn’t feel right.
Here’s what you should do if you suspect fraud in your organization, along with practical internal controls to help prevent future issues.
What to Do If You Suspect Internal Fraud
- Don’t jump to conclusions. Before confronting anyone or taking action, gather documentation and review the situation carefully. Errors do happen, and it’s important to distinguish between an honest mistake and intentional misconduct.
- Secure financial access. Limit access to sensitive systems or accounts until you can complete a thorough review. This may mean changing passwords, pausing approval authority, or temporarily reassigning responsibilities.
- Bring us in to help. As a team that understands your business, we can help you investigate without raising red flags internally. Their objective review can confirm whether fraud occurred and help assess its impact.
- Document everything. Keep detailed records of inconsistencies, communications, and findings. If legal action or termination becomes necessary, solid documentation is essential.
- Follow your company’s HR and legal procedures. Any suspected fraud involving employees should be handled with care to protect your business from liability and maintain professionalism.
5 Simple Internal Controls Every Business Should Implement
Even lean operations can implement effective fraud prevention measures. Here are a few internal controls that don’t require major investment:
- Segregate financial duties. Ensure no single employee has control over all aspects of a financial transaction. For example, the person issuing payments should not also be reconciling the bank account.
- Require dual approval for payments. Set a threshold above which all checks, ACH transfers, or credit card purchases require approval from two people.
- Reconcile accounts regularly and promptly. Perform bank and credit card reconciliations monthly and review them for unusual entries or delayed posting.
- Use secure accounting software with audit trails. Choose financial platforms that track who makes changes and when. This transparency helps deter manipulation.
- Monitor employee vacations. It may sound odd, but mandatory time off can sometimes expose irregularities that only become apparent when someone else takes over their duties.
Stay Proactive, Not Reactive
Suspecting internal fraud is a serious concern, but acting early and establishing preventive controls can help protect your business from lasting damage. If you’re unsure where to start or want a second opinion on your current systems, our team is here to help.