How Fraud Prevention is a Tool to Help Businesses Scale
“Scale, Seven Proven Principles to Grow Your Business and Get Your Life Back” written by Jeff Hoffman and David Finkel is a well respected book on how to systematically grow both product and service businesses. It presents many concrete ideas about leveraging employees, processes and systems as force multipliers to grow a business well beyond the direct contributions an owner puts into the business.
One of the key themes throughout the book are controls. Part III, the Finance Pillar specifically discusses controls for reducing fraud, waste and shrinkage from your business. It suggests common ideas such as segregation of duties, but also novel approaches such as a manager hand delivering pay cheques to employees who are on off-site construction projects to ensure the employee exists.
The book also discusses controls around who has access to the accounting system and tracking their activity within the accounting system. This is both a detective control and also a deterrent as employees know they might be caught if they are doing something inappropriate with the books and records.
They point out that QuickBooks from Intuit is widely used by small businesses. We presented a three part blog series on reviewing specific reports within QuickBooks to review for fictions employees, fictitious vendors and anomalies with respect to the timing of transactions.
For any businesses cash flow and (self) funding are key components to success; however, these are especially important when the business is attempting to scale. Preventative, detective and remedial controls that reduce fraud and malfeasance are integral to maximizing cash flow and ensuring that every dollar is spent on the growth goals, not on criminality.