Preventing Fraud from Within- Part III

John J. Kasperek, President, recently gave seminar at the Missouri Athletic Club on preventing fraud against small business.  Here is Part Three of his remarks:

 How can people defraud your business?

Here are most common frauds that I have witnessed based on 25 years of practice:

1. Company Bookkeeper pockets cash or endorses checks for self and marks customer invoice as paid.

(To prevent, periodically trace customer invoice to bank statement;

Publicize independent bank account reconciliations by owner or outside accountant.

Do background check prior to hiring).

2. Company Bookkeeper authorizes on-line withdrawal of company funds to personal account.

(To prevent, only allow the actual withdrawal by someone with a higher level of authority.

Have hard copies of bank statements sent outside of business- owner’s home; outside accountant).

3. Fake payroll check clears the bank;

Duplicated from valid check out of the operating account by employee ‘in the field’.

(To prevent, have a separate account for payroll with ZBA feature. ZBA accounts can be easily monitored. Employees only have bank account information with a zero balance on checks).

4. Copying Personally Identifiable Information” (PII) from company computers for unauthorized use.

(To prevent, have a concise company privacy policy that is signed off on by new employees & enforce it.

Deny access as policy:  Review access setups in software, Truncate copy/paste features on operating systems, Disable “disk drives” or other portable media.)

5. Former employee taps in remotely to computer.

(To prevent, delete remote entry access upon departure).

6. Customer fakes false accusation to get an unwarranted refund of goods and/or service;

Threatens action with consumer protection group.

(Call the former customer’s bluff. Most of these watchdog groups only want a settlement if it is warranted).



It is easy for small business to get wrapped up in the day-to-day and not focus on anything else. And especially don’t think about fraud until it I too late. Hopefully, these remarks get small business people thinking about being proactive about fraud prevention and realize it is not that difficult to implement a few simple practices.

John J. Kasperek, Twenty-Five year business owner.