Cohen Greve & Company engages in a considerable amount of forensic work, mostly but not limited to the matrimonial and shareholder dispute area. The matrimonial disputes include spouses hiding assets, income and doing whatever they can to maximize their "exit package."
The business side holds just as many dramatic personal stories, with partners and trusted bookkeepers shocking their partners and colleagues. To prevent your business from becoming a fraud statistic in 2014, here are some suggestions, based on our decades of experience as forensic accountants:
Have proper fiscal controls in place. Small businesses may find it burdensome, but monthly reports, monthly financial meetings and reviewing bank statements on a regular basis are necessary to catch problems upstream. Failure to do so will be far more costly in the long run.
Know what is going on in your business. We see this scenario very often. One partner doesn't like crunching numbers, and prefers closing deals and servicing clients. The other partner is in charge of everything financial: books, payroll, taxes and financial reporting. The potential for misunderstandings and mismanagement is enormous. When the business is successful, the outside partner doesn't want to know about the details. But if the business hits a rough patch, or the money starts getting funny, all of a sudden suspicions and accusations arise. That often results in hiring a forensic accountant.
Should you trust the trusted bookkeeper? Short answer: maybe not. Longer answer: fraud, fiscal abuse and outright embezzlement often arises when a long-standing employee - a bookkeeper, administrative assistant - has complete, unchecked access to bank accounts, signatory rights and the cash drawer. It doesn't matter how well paid the employee is either - an employee who feels that he or she deserves to enjoy the profits of the company for their years of service is just as likely to steal from the company as one who simply takes advantage of lax controls. An alarm should go off in an owner's head when the $40,000 bookkeeper shows up to work in a luxury car, wearing a Rolex or is taking luxurious vacations.
Set up a fraud-prevention system with a professional and follow the instructions. An experienced forensic accountant can help a business set up systems that will keep key partners informed, track normal flow of money and goods/services and set off alerts when something goes awry, regardless of the cause. Reminder: setting up the system is step one. Using it - and not ignoring the warning signs - will be critical to preventing fraud and losses to your business.
Forecasting to clarify expectations and measure progress. At the end of the fiscal year or at the least at the start of the New Year, create some parameters, some expectations for the coming year. Forecasting gives you a data set to compare performance, measure progress and establish hard numbers that can be used as a touchstone over the course of the year. Any wide variation in numbers should immediately be investigated.
Set the tone at the top. The business owner, senior officials and upper management are responsible for setting the tone for procedures and policies, what will be tolerated and what won't. This sends a clear message of what the business will stand for and what it won't. Best practices, adherence to high standards and accuracy and expectations of oversight can and will trickle down.
If you have questions or concerns about fraud in your business or in your client's business, call our office at 516-877-1900 and ask to speak with a partner."