Having best practices for security and fraud prevention in your company is important. We share below some of these best practices and how you can integrate them into your QuickBooks and accounting routine.
If you have proper security best practices in place, you can find security issues in fraud problems quickly. In addition, you can prevent these issues from happening in the first place.
Common Fraud Situations
There are a number of fraud and security problems that small businesses often face.
- Stealing money directly from bank accounts – Depending on the level of access you give your employees, it may be possible for employees to take money directly from bank accounts. Using certain features of QuickBooks that we will share below, you can prevent these issues from occurring and catch them quickly if they do occur.
- Intercepting payments from accounts receivable – Most businesses have accounts receivable and customers sending payments to satisfy their accounts receivable. Certain employees may have access to these payments and depending on your practices and procedures, employees could possibly deposit incoming checks into their own separate bank account. We will also share QuickBooks features you can use to prevent this from happening.
- Employees writing checks to themselves – Accounts payable is another potential fraud area in your company. For example, an employee with access to accounts payable processes could either create a fake vendor to write checks to themselves or have a fraudulent arrangement with an existing vendor that would enable them to write checks to that vendor and then receive payment from that vendor, thus effectively writing checks to themselves.
Preventing and Identifying Fraud with QuickBooks
There are a number of features within QuickBooks that you can use to identify and even prevent the above fraudulent situations from happening in your business.
1. Accounts Receivable Fraud – By reviewing accounts receivable information regularly, you can identify fraudulent activity and address it quickly. For example;
- Regularly monitor accounts receivable reports within QuickBooks.
- Look for changes in accounts receivable balances with specific customers that do not make sense to you.
- Investigate these to make sure that these balances are indeed accurate and not the result of fraudulent depositing of Customers>Customer Payments in employee accounts.
2. Preventing Accounts Payable Fraud – You can also create reports within QuickBooks that shows expenses categorized by vendors. Using this information;
- You can see all payments being sent to vendors as well as trends regarding those payments over time.
- Again, make sure that you are aware of each vendor listed and investigate trends or specific vendors that you are not familiar with to make sure there is no fraudulent activity going on.
3. Review Voided and Deleted Transactions – QuickBooks enables you to void or delete transactions if needed. Though not all QuickBooks users will have this available to them, it is sometimes needed.
- Periodically review QuickBooks reports that shows all voided and deleted transactions to ensure that these transactions were voided or deleted appropriately.
- If you see certain transactions that are suspicious, investigate them.
4. Reconcile Bank Accounts – Another important best practice to prevent and identify fraudulent activity quickly is to regularly reconcile your bank accounts.
- Depending on the size of your business, this activity is something that maybe best managed by you as the business owner.
- By reconciling bank accounts regularly, you can identify potentially fraudulent activities easily.
- If you do not reconcile bank accounts yourself, make sure that you do regularly review the reconciliation report within QuickBooks so that you can still see this activity if it occurs.