Prevent fraud

Prevent fraud is critical in any business operation. Business regardless of its size is vulnerable to numerous types of fraud and all these have big financial impact on your business.

In any case fraud can occur when there is lack of control in place to prevent or deter it from happening. Fraud can be anything from cash misappropriation to falsification of accounting transactions including creating dummy customers for money laundering purposes.

Business owners are advised to take reasonable steps to prevent fraud. There are ways to protect your business against fraud. This includes the following:

Screen Employees

Make all necessary background checks and follow up on references, especially for sensitive positions in your business such as Finance Director who will be primarily dealing with your company financial affairs.

Train Staff

Ensure your staff are adequately trained in your standard procedures, and know what to do if there are any deviations. Your staff should know who to report to when they noted or suspected fraud has occurred.

Implement Whistleblowing Procedures

Encourage, don’t punish, whistleblowers, but be aware of the possibility of staff vendettas. Care must be taken when dealing with whistleblowers.

Use The Courts When Necessary

If your company has been defrauded by an outsider you may seek a civil action first. You can obtain a court order which enables assets to be traced and frozen.


As an alternative to the courts, you may negotiate with the individuals involved; try asking for any fraudulently obtained money to be repaid.

Use Technology And Computers

There are various IT technological options for minimizing fraud, for instance ability to recover deleted information from PCs, use of PIN numbers, and have layers of authorization access using passwords for different grade of employees within the company.

Stay Alert

Be aware of the possibility of fraud at all times and especially if things are not as normal as they should be, for instance suppliers’ bills on the increase or slow collection of debts or unduly high stock levels and so on.

Two Signatories For Cheque

It would be wise to always have two signatories for signing a cheque for certain amount of pay out, and for authorizing payments via online bank accounts. This can be payment more than £20,000 require two signatories or approval of two finance managers or director.

Cash handling

Cash handling procedure in place for staff for efficient management, better controls of your business cash and avoid dispute as well as to prevent fraud.

It is good idea your business to draw up internal control procedures for your finance staff who handle your business cash and monies matters in office.

The cash handling procedures shall consider cover the following:

Bank Deposits

When paying a cheque or cash into a bank account, a deposit or paying in slip must be completed. Deposits can be made in person, by mail, or at automated teller machine (ATM). Cash should not be made by mail.

Receipts From Customers

Cash book, individual customer’s ledgers and trade debtors control accounts must be updated to keep track of your customers’ outstanding balances.

Send reminders to follow up on outstanding sales invoices, record of methods of settlement from customers for invoices due. Cash or cheque or by bank transfer or combination of the three.

For high volume transactions business, it is advisable to maintain your accounting records using well known bookkeeping software like Clearbooks, Xero, Sage or Quickbooks as this will cut down administrative burden and accuracy can be maintained.

Issue cheque

The cheque must be signed by authorized signatory only and approval must be obtained for payment.

Ideally, the person authorizing the invoice for payment should not be the same person signing the cheques.

There are computer software packages available that write cheques and reconcile a bank amount automatically. Using computer software is the quickest and accurate way of writing cheques. The computer prints the cheques and records the payments for accounting purposes.

Accounting statements and bank reconciliations are then prepared from the information entered for the cheques payments. The use of computer-prepared cheques simplified the bookkeeping process.

Paying Bills Electronically

Bills can be paid electronically as an alternative to writing cheques.

There are different types of electronics payments:

  • Paying Online,
  • BACS payment,
  • Electronic Fund Transfer,
  • Standing Order,
  • Direct Debits,
  • Bank transfers,
  • Telegraphic transfer

These facilities have made global trading possible.

You may pay your staff directly by deposit salary to their bank accounts. You may electronically send PAYE and NIC to the HMRC.

Handling cash electronically enable monies available sooner between banks and there is less chance of fraud.

Security is extremely important when paying bills online. Passwords and identification numbers are a key to your company’s bank account. They should never be left where unauthorized staff or the public can see them.

However, it is still a best practice to perform accuracy check by reviewing the payments made electronically on regular basis.

Bank Accounts Reconciliation

Doing bank reconciliation frequently is compulsory to ensure there are sufficient funds in your bank accounts to clear payments made electronically such as direct debits, cheques issued, standing order and BACS payments.

The suppliers’ accounts must be updated frequently to ensure no overdue payments. Keep an eye on any discounts offered by the suppliers for early payments because this provides further savings for your business if there is sufficient cash in the bank and payment can be made.

Petty Cash

Petty cash is normally used for paying small items, ad-hoc expenses, stationery, taxi fares, and for reimbursement of staff expenses.

Companies usually set a maximum amount for withdrawals from the petty cash fund; the limit can be for expenses claimed up to £200.

Petty cash expenses and receipts must be retained and ensure the person claiming the petty cash sign the petty cash voucher.

An effective cash handling procedure gives confidence to your Auditor that your accounting system is reliable and your company accounts give a true and fair view.

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