Tips for lowering risk of internal fraud
Internal processes and controls form the backbone of a secure organization, and establishing them early can ensure your company accelerates and grows with as little friction as possible. Building and communicating companywide policies and best practices can lower your risk of internal fraud, stolen funds or intellectual property, and loss of data from compromised systems.
Segregation of duties
When you involve several people in the lifespan of a single transaction, from initiation to settlement and reporting, you minimize your risk of fraud or human error. Basically, you ensure that no single person is in a position to both commit and conceal fraud or errors. Even a small company should assign different individuals to perform the front- and back-office processes for a given transaction.
Some best practices for segregation of duties include:
- Formalize internal processes to ensure appropriate checks and balances.
- Separate roles for initiation and approval of payments.
- Separate accounting team.
- Set up discrete account and security access.
Accounts payable controls
To minimize fraud, we recommend setting up strong employee controls and vendor master file access policies in accounts payable. Ensuring your employees follow established practices minimizes the risk that your company loses funds in imposter or accounts payable fraud events.
The following are additional accounts payable best practices:
- Employ out-of-band authentication to secure account access and payments approvals
- Limit who can add new vendors or edit the master vendor file.
- Segregate duties so one person isn’t handling billing, payment processing and check signing.
- Require a W-9 form from every vendor before their first invoice is paid.