Thursday, October 25, 2012

4 Tips for Preventing Employee Fraud

How protected is your company from employee theft?  Just the other day there was another story about how a Treasurer embezzled a half a million dollars and spent the money on a lavish lifestyle, travel and more.  It can happen to any size business and is often a trusted employee.  At a recent workshop, I learned a few tips from retired FBI Agent Jeff Lanza who is a nationally well-known speaker on Identify Theft and Fraud.

We learned more about fraud regarding checks and other theft, rather than strictly cash, so here are a few  important safeguards that business owners can put in place.

1.  Put Policies in Place.

Small businesses should have something like an employee or personnel manual, and other policies put into place such as Drug Free Workplace, Travel Policy, etc. to establish acceptable employee behavior when the employee is hired.  This seems like common sense, but just the other day I saw a discussion on how a company can 'stop' their employees from charging personal expenses on the company credit card.  This entire topic could be avoided by implementing a travel policy or having a section in the Personnel Manual.

If you do not have any policies established, there are numerous samples and templates available.  It is never too late to start!

2.  Establish Internal Controls.

Granting an employee too much control can lead to theft.  Setting up internal controls is a good way to protect against this.  For example, does someone review the payroll records?  Check vendor accounts?  Is your bookkeeper the only one with access to the bookkeeping system?

This can be a challenge for many small businesses with a few key employees, but is extremely important.  Even last week there was an article about how a bookkeeper had bilked a company out of thousands of dollars - their response was that they couldn't believe it...she was like family.

Keep an eye out for employees that:
1.  Are the only one who has access to account registers and bookkeeping.
2.  Won't let anyone get the mail.
3.  Never takes a day off.

I worked for one city that had an employee who stole from utility customers. She was ultimately fired and prosecuted.  The next receptionist we hired was unusually interested in how she went about it; sure enough, she tried it as well but luckily was caught thanks to new processes that were put in place following the first theft.

Things that can help:

  • Internal audits and surprise audits or reviews by an external firm.
  • Dual check signing requirements over a certain dollar amount.
  • Inventory Controls. 
  • Question vendor accounts - some payables clerks have set up bogus vendor accounts, submitted phony invoices and then paid that company.
  • Cross-training.
  • Setting up a tip hotline or a process for reporting theft.
As an owner, you put yourself and the business at risk if you do not have a good process in place for checking and reviewing revenues and expenses. 

3.  Review Check Images Online

This is easy enough to do now with online banking.  Check washing is commonly used in check fraud.  A person will take a handwritten check, 'wash' the ink off and make it out to themselves.  Lanza recommended using gel ink and purchasing safety-type business checks from a bank or other professional printer.

Another way for employees to misuse company checks would be if they were responsible for paying vendors directly.  A recent lumbermill employee stole over $500,000 from selling pallets to an unauthorized company. 

4. Verify References and Run Background Checks

If you are not currently checking references for potential hires, you should start.  Many people will tell you exactly what you want to hear in an interview and you are so excited to hire the person that this does not happen.  Some companies will require the prospective employee to run a credit check, others will do extensive background investigations.  

Employee theft and fraud can destroy a business - both financially and its reputation.  Above all, trust your instincts, yet don't be too trusting.  Taking some important steps to protect your business may not ever prevent theft but it can help catch it before it is too late.  Your Spokane SBDC Advisor can help if you are not sure where to get started.

Wednesday, October 24, 2012

Spokane Advisor Completes Certification Process

Tammy Everts, CBA

Tammy Everts has recently completed her certification to be a certified business advisor (CBA) for the Spokane Small Business Development Center (SBDC).
Sponsored by the Washington Small Business Development Center network in Spokane, the Washington Certified Business Advisor Certification program is designed to create a common body of knowledge and standards of performance among a diverse group of professionals.
Everts underwent an extensive six-month program of work to meet the requirements to be certified.  The peer-reviewed process involved meeting with a mentor in the network, co-advising with other Certified Business Advisors and a 13-module course of work in areas such as business planning, financial management, marketing and international trade.  

Friday, October 19, 2012

Important Business License Changes for New Businesses in Spokane

Important update for new businesses in the Spokane area that should help streamline the licensing process.  Starting on November 13, 2012, new business can now apply for a City of Spokane Business License at the same time they apply for their Washington State UBI number and business registration.

Checklist for getting started
On the downside, there is an additional $9.00 processing fee.  This process is currently in place for cities of Spokane Valley, Liberty Lake and others in the region.

For certain types of business owners that do business in multiple locations such as cleaning companies, sales, and service companies, I recommend that you check with each city you will be conducting business in to verify if a business license is required.  Individual cities can impose a licensing requirement and just having a license where you have a physical location may not be adequate.

Read the full announcement here.

Not sure where to start?  

The Spokane Small Business Development Center works with new business owners and people ready to start a business to make sure you have the information you need to make the decisions that are right for you and your company.
· One-on-one confidential, no fee business advising.
· Management training and market research. 
· Access to the entire SBDC network of experienced, Certified Business Advisors.

Conveniently located in 24 locations throughout the state, the SBDC offers a host of services designed to help you grow your business, achieve higher profits and improve operations.  Contact the Spokane Center at (509) 358-7893 or via the website at

Friday, October 5, 2012

L&I Compliance Emphasis on Unlicensed Contractors

We always advise getting the proper licenses, permits and registrations.  Not only is it a best practice, safety concern and just good business, but a recent crackdown on unlicensed contractors by Labor and Industries shows that it can be expensive too.

Read more:  L&I compliance inspectors target underground economy in weekend sweep.  

Does this look safe to you?
Visit the Washington State Labor and Industries page for general contractor requirements.

You can also check the Washington State Department of Licensing site for information on what types of licenses are required in the State.