Don’t let small discrepancies turn into big problems.
Internal fraud can quietly drain your company’s finances, damage trust, and disrupt operations often before you even realize something is wrong. For small and mid-sized businesses, especially those in Connecticut where lean teams often wear multiple hats, early detection is critical.
Here are five financial red flags that might signal internal fraud is lurking in your business:
Unexplained Variances in Financial Reports
If your revenue numbers or expense reports consistently don’t align with projections or prior periods without a clear explanation, it could be more than just an accounting error. Pay close attention to trends, not just the totals.
Excessive Voids or Refunds
Frequent voided transactions or refunds, especially when processed by the same individual, may be a tactic to siphon money without triggering alarms. A pattern here should always be reviewed.
Missing Documentation or Delayed Reconciliation
When invoices go missing or bank reconciliations are delayed repeatedly, it could be a sign someone is trying to hide discrepancies. A strong internal control system should prevent delays and enforce accountability.
Employee Lifestyle That Doesn’t Match Compensation
It’s not always comfortable to ask questions about an employee’s personal life, but if someone suddenly exhibits a lifestyle far beyond what their salary would reasonably support, it’s worth investigating further.
Lack of Segregation of Duties
When one person controls too many aspects of the financial process (e.g., handling payments, reconciling accounts, and approving invoices), the risk of fraud increases dramatically. Even in small companies, basic checks and balances are essential.
Protecting Your Business
Internal fraud can be difficult to detect, but it’s not impossible to prevent. Regular audits, clear financial oversight, and working with a proactive accounting partner can help safeguard your business.
Have questions or need help setting up internal controls? We’re here to help you keep your business secure, compliant, and growing with confidence.