As a small business owner, embezzlement can be incredibly devastating to your livelihood, so you need to make sure that you take the proper precautions to prevent embezzlement.  The following three steps are tips on how to stop embezzlement for small businesses.

Know the warning signs of embezzlement

The earlier you catch embezzlement, the faster you’ll be able to prevent further damage to your business and take the necessary actions against the individuals committing the embezzlement.  Some of the most common warning signs are bounced business checks indicating that funds are being taken out of your account, inventory shortages pointing towards unrecorded sales or employee theft, and profit declines in conjunction with increases in expenses (cash is being taken out of your business illegitimately).

Basic internal precautions

You should screen all applicants before you hire them to make sure they are of good character. Periodically examine all finances related to your employees to make sure that everything is legitimate. Your payroll should be prepared by more than one person or do it personally, which will prevent illegitimate employee checks from being written. Dividing financial responsibilities and functions will make it more difficult for an individual to embezzle money.  You should also set up an internal audit system that creates a paper trail so you can always trace an illegitimate check back to the source.

Bonding Employees

Bonding is the common practice for employers to protect themselves from employees committing fraudulent and dishonest acts such as theft, forgery, and embezzlement. You’ll want to talk with your insurance agent about the different types of coverage that you want for your business, which can range from an individual employee to a blanket fidelity bond, covering all employees at your business.

If you’re really worried about the possibility of embezzlement, you should consider hiring an accountant.  An accountant can help you monitor for signs of embezzlement, so if you don’t already have one that you trust, you should use TalkLocal to find an accountant.  You can be sure that the accountants you talk to will be high quality and highly rated!

This entry was originally posted on Wednesday, September 19th, 2012 at 10:00 am and is filed under Accountants. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.