Image by Myriam Zilles from Pixabay

Image by Myriam Zilles from Pixabay

If you survey most business owners want to grow their companies. When I speak and ask this question most everyone in the room raises their hand.

And the reasons why make sense. If you get bigger, generally speaking, there is the chance to have higher revenues, achieve economies of scale to lower costs and possibly have more money on the bottom line.

There’s also the chance for the business owner to become more strategic. To step beyond the day-to-day and negotiate bigger deals and think longer-term. This generally only comes when you hit a certain size and scale so that the “bills are paid.”

Once we hit that magical operational stability so many options are opened for the owner.

But we have to be careful. Once we, as owners, start taking leisure time or working on bigger long-term projects the very real possibility of fraud raises its ugly head. You see while we are doing our thing our employees may be doing their thing – which might include taking a little extra cut for themselves.

Much of these lessons are classic. They go back to my training as a Certified Public Accountant and work as an attorney. But they are powerful for all businesses.

Here’s some things to look at for you, your team and your company as you hit that point of freeing yourself up a little.

Segregation Of Duties

One of the keys in growing your business and preventing fraud and theft is to separate duties. For instance the person that sets up vendors shouldn’t be the same person that authorizes payments to those vendors. You want to get at least two people involved this way any payment requires two people before money can leave the company.

Today’s software programs make the segregation of duties easy if you get the settings right. But someone that knows what they are doing needs to check those settings from both and accounting/financial control perspective and from an IT perspective. First ask who should be able to do what from a business standpoint. Then check to make sure the computers enforce that.

The key to segregation of duties is to divide authority among your team so that no one person can do everything. Everyone needs to have someone else involved to spend money, give up company resources or bind the company in legal contracts.

Review And Oversight

Going hand-in-hand with the segregation of duties is the idea that all organizations need to have review and oversight. By having duties and functions segregated we can then apply oversight to those decisions.

In the earlier example we talked about an employee setting up vendors. Their supervisor can then go over the list of added vendors every morning to make sure no suspicious vendors were added to the list. For example, was the person’s brother added as a vendor? Or maybe a new vendor was added with a very similar name to an existing vendor (this is a common scam where over time the same bill will be paid to both vendors – the real one and also the fake one with a similar name).

Systems should be built so they can be reviewed by others in power within the organization. This keeps any one employee from having the power to divert resources.

Budgets and Projections

Beyond review and oversight, the proper use of budgets and projections and help combat waste and fraud. For instance, if a company knows they have a budget of $1,000,000 of widgets to purchase per year and the spending starts to exceed a pace for $1,000,000 per year it can cause a review of spending.

In such a case maybe business is brisk and more widgets were needed to meet customer demand. A senior-level employee could review that and all is well. But maybe someone is stealing widgets? The budget will direct management to the problem sooner so it can be addressed.

Detailed budgeting and projections can act as a great accountability tool and help us spot issues sooner.


Doing audits and checks can also be powerful for making sure things are working as planned and avoiding theft and fraud. Audits typically come in two varieties: internal and external.

Internal audits usually involve making sure your systems work and spot checking specific transactions. This can be a powerful want to find issues before they get bigger.

External audit typically bring in an outside accounting firm to check over things. This can find things that are missed in the internal audit or bigger issues (like collusion within the organization).

Work with your advisors to come up with a practical audit strategy that will work for your business.

Employee Rotations and Vacations

Another important strategy is rotate employees through different jobs and to make them take vacations. By moving employees from one job function to another you’ll be cross training them. You’ll also be putting someone else into their seat so that that employee will, effectively, do a mini-audit of their work in process and past work. For instance, if you had an employee cutting checks to a fake vendor they will likely be unable to do so in a different role and the person filling their role might see it.

While not intuitive at first letting employees take vacation, or forcing them to do so, can be great for controlling your business. While an employee is on vacation there are not there to intercept mail, cover things up or redirect paperwork. Many companies have uncovered fraud when the perpetrator took off for a few days and someone else saw something unusual.

Think of who is doing what and how to change things up so that others can see what others have been doing.

Staying Involved

For smaller companies in particular, and also bigger companies, owner involvement can be key. Even if an owner gives up some day-to-day control having knowledge of what is going on – particularly the financial numbers – can help a lot.

Owners usually know how the business should be flowing, the profit levels anticipated and the relationships in the business. Often an owner will be able to sense if something is off in the operations before others.

So even if you free yourself up some do keep a good pulse on what is going on in the business.

Installing Systems

If you’ve noticed all of the things we have talked about are about installing various systems. Systems of controls and processes that look over your business.

Usually these systems are doing by computers and computer software but some physical controls also make sense too. For instance controlling access to files and inventory.

You’ll want to think about what systems and processes you want and need and how to install them. From there it’s a matter of building the systems and training them.

Regardless of what you install you’ll want to check your systems regularly and build on them.

Nothing Is Foolproof

One thing to remember is no matter how good your systems are there can still be fraud or deception which can erase years of hard work. So owners and leadership need to stay involved and on alert.

The systems and processes in this article will make things a bit harder for folks to work around them. But it’s still possible. So be smart and careful about your business.

What do you think?  Are you ready to charge forward and build systems in your business? Or do you feel overwhelmed?

By: The Our Shawn McBride, is the man you call when you want a keynote, training or a consultant to get your business ready for The Future of Business. He’s the host of The Future Done Right(TM) Show and a long-time business attorney. If you want regular content on the future of business subscribe to get new blog posts from us here.

*** NOTE: Don’t rely on this article as legal or accounting advice. Discussions are necessarily of a general nature. Talk to your advisors about your situation. ****

Check out some of my other articles on

Why Ownership Isn’t What It Used To Be

Hit The Ground Running, Deliver Value: This Is The Future of Business

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