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Ira Zorn, CPA, a partner with accounting firm Blackman Kallick in Chicago, offers these tips for reducing the risk of embezzlement:
1) Segregate financial duties. Small businesses are particularly vulnerable to embezzlement because there's often just one person balancing the books, counting the cash, making the deposits, and sending out the invoices. Divide these responsibilities between several employees so no one person can steal without someone else noticing thatthere's a problem.
2) Have your company's bank statements sent to your home. This way you'll always see the statements before anyone at the office has a chance to hide evidence of their theft.
3) Set up a positive pay arrangement with your bank. Under this arrangement, you electronically send your bank a daily list of the checks you've written. If someone alters one of your checks or cuts a check without your knowledge, your bank won't honor it.
4) Open a lock box with your bank. This allows receivables to be deposited directly into your account without first being handled by anyone at your company.
5) Review payroll checks for names you don't know, and for employees that are no longer with your company. Unscrupulous payroll department employees sometimes sneak 'ghost' employees into the system and pocket their salaries. Consider personally distributing payroll checks to each employee by hand.
