Rose Report: Issue 45
Fraud on the Rise Due to COVID-19: Is Your Finance and Accounting System Prepared?
By Ted Rose, Rose Financial Solutions
COVID-19 has impacted every facet of the business landscape. From managing remote employs to understanding PPP loans, the past year has challenged companies in ways that couldn’t have been imagined. As businesses try to put the past year behind them and get back to business as usual, the Association of Certified Fraud Examiners (ACFE) reports that fraud risks are evolving in the wake pandemic. That’s why it is important to utilize accounting best practices that not only deter employees or others from committing fraud, but also provide a clearer view of your businesses’ finances.
Risk Management Program
Implementing a risk management program is the first step toward lowering your company’s fraud risk. You must make it clear to employees that fraudulent activity is not allowed and if it does occur, action will be taken. You should also review your insurance coverage every year to make sure you are protected against internal and external thefts. Additionally, if you outsource you accounting functions, make sure the firm is properly bonded and that they conduct pre-employment screening of their employees.
Failure to develop effective control structures increases the danger of fraud. Companies should separate responsibilities by delegating company operations to more than one person or department. Additionally, your finance and accounting system should integrate automated workflows that enforce protocols that ensure only those with authorization can access, review, and approve payments.
Know Your Numbers
With financial clarity, it is much easier to identify unexpected expenses or balance sheet issues that are incurred because of fraud. That’s why it is important to reconcile your accounts on a monthly basis. Make sure to:
- Access your bank records online on a regular basis and set up alerts for notifications if there are any large or unexpected transactions.
- Track and manage credit card usage.
- Increase segregation of duties through outsourcing to bonded accounting firm.
- Perform a regular audit or review by an outside accounting firm.
- Eliminate the variations that occur based on the cash basis of accounting (recording revenue when cash is received and expenses when checks are cut), utilize the accrual basis of accounting (recording revenue when earned and expenses when incurred). This will help you identify unexpected results.
- Reconcile all balance sheet accounts monthly. Make sure that transactions on the balance sheet are appropriate, so inappropriate items within these balances do not mask the results presented in the income statement.
- Close each financial period so past transactions cannot be altered.
- Utilize an electronic payment system in order to make it harder to destroy or hide important documents.
Often, small- to mid-sized companies do not have the systems and processes in place to deter fraud. If you do not have the resources, i.e., staff or financial, to implement a fraud prevention plan you may want to consider outsourcing your finance and accounting processes.
At Rose Financial Solutions (RFS), we’ve wrapped over 25 years of expertise into our cost-effective Finance as a Service (FaaS) solution that combines a team of experienced professionals with our leading-edge workflow technology, EasbyTM powered by RFSWorkflowTM. Easby seamlessly integrate with your current accounting software, streamlines processes, and delivers a 360-degree view of your company’s financial performance. Utilizing the best people, systems, and practices, our solution puts you on the path to financial clarity and helps you identified fraud. Get started today by scheduling a complimentary virtual meeting.
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business.