If I were 30 years younger, I’d be tempted to work in forensic accounting. I’m especially interested in theft prevention in smaller businesses. I have a Google Alert set for ‘CFO Fraud,’ and I’m disappointed at how often I read about embezzlement cases where hundreds of thousands of dollars have been stolen. In many cases, the wrongdoing could have been prevented or minimized.
In business, the goal is to create something special for customers and build a company that will endure for years. Yet, some individuals seek to thwart those aspirations by stealing when they have the need and opportunity. Accordingly, a dose of prevention is needed, and the cost is not that high.
No Small Business Is Immune to Internal Theft
One of my favorite books is by Ken Iverson (Plain Talk), who led Nucor to new horizons in the steel industry from the 1960s to the 1990s.
Yet, they had theft in their business:
- A controller embezzled more than $400,000
- A shipping manager was caught invoicing the company phantom freight charges over 10 years for more than $750,000
Big company. Great internal controls. Great culture. You’d think Nucor would never have been a victim of fraud. Think again. If it can happen at Nucor, think of the endless possibilities of theft at your small business.
A Small Company CFO’s Advice
If you are subject to an audit or review, don’t get comfortable. That attestation work is not designed to detect fraud. Here’s what I suggest:
- In layperson terms, hire a forensic accounting firm to conduct a 2-hour workshop on how to prevent fraud. Most forensic accounting firms have this expertise.
- Have that same firm perform agreed-upon procedures at least 3x annually, unannounced (you will not be disappointed)
Regarding agreed-upon procedures, I can create a list of 10 areas where the firm should regularly test for potential improprieties. I can also tell you how the forensic accounting firm should price this work. Feel free to reach out to me on LinkedIn with any questions or feedback.
