Part 9 of 10, Fraud Inoculation

Part 9 of 10, Fraud Inoculation

The Payoff for this Intensive Monitoring

The owner of the firm that suffered this large-scale embezzlement never wants to be materially defrauded again. He has the cash balance in his head, every day. In effect, by going over the cash flows in and out regularly, and having a reporting system that carefully tracks and matches monies in and out in all areas of his business, he thoroughly checks for material fraud every week and every month. No more surprises, ever.

Is the daily/weekly/monthly cost worth it? If one includes the extra burden of regular monitoring, the owner’s extra time may only average an hour extra per week. Because the fraud trauma cut so deeply into his personal psyche as this is the only company he has worked for in his 30-year career, the extra time spent by him is simple prudence. While the accounting department probably spends several more hours per week generating the reports and the information and the cross checks required.

No, there are really no guarantees that material fraud will not happen again at this firm, but such an unhappy event is highly unlikely. Why? Because the owner is continually auditing his firm, comparing the reports and information the accounting department generates with the cash balances in the bank. Either this comprehensive information approximately matches or there is an error in the calculation.

In addition to fraud avoidance, there are other less obvious, even unspoken benefits as the accounting information is now robust enough that internal accounting will not be the cause of restraining future growth, as often happens in small businesses. Another benefit is that this business survived a potential killing blow, which survival status allows for the employees to feel an atypical sort of loyalty and a camaraderie  which contributes to employee long-term efficiency.


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