MANAGEMENT

Five Simple Controls to Prevent Fraud

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Businessman holding up magnifying glass

Strengthen your processes and your deterrence.

By Ed Mendlowitz
77 Ways to Wow!

I’ve talked about fraud in not-for-profits, but it is also a serious issue for business firms. Here are some cash fraud scenarios and prevention techniques that can apply to all types of organizations.

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SCENARIO: One employee who is responsible for, or has access to, the handling, recording and mailing of cash disbursements creates a non-existing vendor who sends the company invoices, which are paid.
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Six Ways an Internal Audit Helps

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The six principal tasks required.

By Ed Mendlowitz
77 Ways to Wow!

Every business has a system of internal controls. Very small businesses likely rely on luck and the honesty of their one or two office staff. Small businesses rely on their independent auditors to check their system once a year and large companies employ one or more internal auditors on their staff.

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This post explains the internal audit process that applies to every size business. Businesses have voluminous transactions; multiple people involved, companywide; and assets that need protection.
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Systems Must Be Used, Not Just Implemented

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Internal controls are no good on their own.

By Ed Mendlowitz
77 Ways to Wow!

I have addressed the importance of controls when trying to get a client. But it is also important to retain the client. A good system that is not monitored is a sure way to not only lose the client but be kept awake at night.

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If you have been around long enough, you’ve experienced a theft at a business or not-for-profit organization. For nearly ever fraud I have seen, the slightest effort would have thwarted those frauds. Nowadays the only frauds I encounter are new engagements, where I try to quantify what was taken.
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What Internal Controls Mean to Clients

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man writing in notebook

And how to explain them.

By Ed Mendlowitz
77 Ways to Wow!

What are internal controls? Auditors widely use this term. It also appears multiple times in engagement letters for audits of businesses and not-for-profits, but I do not believe many outside of the accounting profession really know or understand what internal controls are. I will try to explain it here.

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Internal controls refer to an organization’s system of deterrence, oversight, checks and balances. An illustration is where someone in a business writes and mails the checks to pay a bill. If this same person then receives the bank statement and performs the reconciliation of that account, there would not be any control or oversight on that person and whether the payment was proper and not misdirected. They are checking their own work. This is how many frauds occur.
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Create an Accountability Chart for Your Firm

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It beats an org chart and here’s why.

By Jody Grunden
Building the Virtual CFO Firm in the Cloud

“Getting the right people on the bus, the wrong people off the bus, and the right people in the right seats – these are all crucial steps in the early stages of buildup…” – Jim Collins, “Good to Great”

When Adam and I first started the company, we didn’t have much organizational structure. We didn’t need it. But as the company grew, it became necessary to develop an organizational structure. There’s a great quote by Michael E. Gerber in his book “The E-Myth Revisited” that says, “Without the Organization Chart, confusion, discord and conflict become the order of the day.”

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We got to a point where we realized that Adam and I didn’t have clarity around our individual roles, and we were overlapping one another. We needed to have clearly defined roles for one another as well as the people who were working for us. Lack of clarity can cause a loss in production.
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Ten Financial Controls to Spur Growth and Profits

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What clients need to watch.

By Ed Mendlowitz
77 Ways to Wow!

If you want your business to grow, don’t focus on only the easy financial controls where you can see quick results – such as holding down petty cash expenditures or checking expense accounts for accuracy.

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Instead, go for the tough steps that affect long-term profits and facilitate growth.

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Start with the Cash

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A wealth of information is lurking there.

By Ed Mendlowitz
77 Ways to Wow!

One time I was asked to audit a hotel in Florida that was going to be foreclosed on by the mortgagor and for which I was paid in advance. The audit was planned and scheduled, and it looked like we had everything under control from our end as much as we could.

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I received a call on a Friday morning that the foreclosure was going to take place sooner than expected, and I had to either do my work Monday through Wednesday or return the retainer because the foreclosure was going to take place on Thursday. I took a Sunday evening flight with a senior accountant. When I walked into the hotel, I got really nervous. This was not a small motel but a big Hilton hotel – not what I anticipated.
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How to Get Organization Minutes in Order

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A 34-point checklist.

By Ed Mendlowitz
77 Ways to Wow! The Checklist Handbook for Advisory Services.

Corporate, LLC, partnership and not-for-profit organizations are usually required to have minutes memorializing certain actions taken by the board of directors or governing body. Yet, many do not either because it has never been done, is a bother, is considered not necessary or overlooked through inaction or unawareness.

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However, it is something that should be done as a best practice, as recognition that there are non-active stakeholders who need transparency, or as tangible evidence that the actions recorded took place timely. In some instances, the IRS looks for minutes as a symbol that the affairs were handled on a businesslike basis or were not one-sided “secret” actions by those in control.
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