The following are notes from our presentation on how to limit your liability by implementing internal and external controls, safeguarding your company against inside and outside fraud. 

  1. Outside Fraud:

    1. Definition: Somebody outside the company finds a way to steal your money.

    2. Debit cards, hacking into bank accounts, email accounts, etc.

    3. How to protect yourself:

      1. Never have a debit card associated with your major bank account. Debit cards can be stolen so easily.

      2. Setup online banking so that you cannot send money out of your bank account. Do not enable the wire transfer or external transfer feature for your online banking account. (Banks will not pay the loss.)

      3. Do your borrowing from a separate bank, and not the bank where you have your major cash bank accounts. Bank loan documents have a clause where they can seize the assets held at the same bank, including cash accounts.

  2. Inside Fraud:

    1. Definition: Somebody inside the company stealing from you

    2. How to protect yourself:

      1. Divided responsibility. Bookkeepers should not sign the checks. Only owners should be a signer on the bank account.

      2. Fake invoices. The owners should review every payment that goes out.

      3. Diverting Income. The owner has to stay on top of his accounts receivable to ensure that you are getting your collections. If your business uses cash, you need to have two people count the cash.


Laura Allen