The Vital Internal Financial Protocols Every Small Business Should Follow

The2022 Association of Certified Fraud Examiners (“ACFE”) Report to the Nationsshows that small businesses (those with fewer than 100 employees) experienced the highest median loss from fraud—over $150,000. The schemes that impacted small businesses more than large companies were incidents of “skimming and check and payment tampering.” Plus, there were many cases of financial fraud involving billing, payroll, expense reimbursements, and cash larceny.

Nearly half of the fraud incidents were, according to the ACFE report, due to a lack of internal controls and the override of existing controls. That is why it is imperative for small businesses to implement and enforce financial controls in their companies.

Financial controls are internal processes designed to identify and prevent fraudulent actions at your company. Businesses implement financial controls (manually or using software, or both) to ensure accounting mistakes are not incorporated into their financials. Think of financial controls as a safety net for your small business, thwarting embezzlement, theft, and fraud. Unfortunately, many small businesses don’t have the knowledge, time, or trained personnel to implement proper financial controls.

Of course, there are no guarantees that you can eliminate fraud in your company, but having these 24 financial controls in place should help mitigate your risk exposure.

1. Keep business and personal finances separate.
2. Review your business’s monthly bank statements in detail.
3. Create monthly cash flow projections.
4. Review all credit and debit card statements for accuracy.
5. Review all outgoing payments.
6. Monitor point-of-sale transactions.
7. Set up inventory control systems.
8. Review payroll before it goes out.
9. Monitor your use of debt.
10. Conduct background checks before you hire new employees.
11. Approve new hires before adding them to the payroll.
12. Regularly update your passwords.
13. Check up on employees involved with your business finances.
14. Don’t put one person in charge of petty cash.
15. Delegate financial duties to multiple employees.
16. Limit access to your financial systems.
17. Create expense reimbursement requirements.
18. Implement check signing processes.
19. Double-check cash deposits.
20. Require vendors to submit detailed invoices.
21. Don’t be predictable.
22. Secure business credit before you need it.
23. Conduct independent reviews of your finances.
24. Invest in technology.

This article originally appeared on Score.