Windows open. Curtains are blowing. The sound of crickets and an occasional train in the distance. It was a simple childhood. It was my childhood. My mother parked her black Ford Falcon and left the keys in the ignition. The doors to our home were unlocked. We trusted our neighbors, and they believed in us. And why would we not? We’d known each other for what seemed like millennia.
But then one night at the dinner table, my father said, “someone stole Miss Gussie’s Chevy.” Unthinkable. Our innocence was broken, and soon my mother took precautionary measures. Each evening, after parking, she would place the car keys under the car seat. No need to take chances. We began to close the windows at night, but still the back door was left unlocked in case my father needed to go out for a smoke.
A couple of months later, I overheard my mother whispering to my grandmother that a man slithered into Miss Kidd’s house in the dead of night and had taken valuables. Miss Kidd lived diagonally from our home, just a stone’s throw away. To think that someone just walked–unannounced–into the octogenarian’s home. How could this be?
Fear was palpable. Our neighborhood’s character shifted. No longer would Mom leave the keys in the car. No longer would we leave the windows open. No more cricket sounds. And my father even locked the back door.
Safely we would sleep, not because there were no threats, but because of protection.
Seeing Risks In Growing Businesses
The evolution of internal controls is no different. Maybe, early in the life of your business, you wrote all the checks and made all the deposits. You tracked all the transactions. There was no fear of theft because life was simple. You did everything, including taking out the trash.
But then the business grew, and you began to hire staff to assist with the accounting. At first, just one bookkeeper. Then two. Later you brought in your second cousin to take care of billing and collections. New bookkeeping software was purchased, and you began to accept payments over the Internet. My, how things change, and change is a good thing, right? In some regards.
But as changing neighborhoods create new risks, so growing businesses create new threats. And increasing complexity brings about a higher chance that valuables will disappear in the night.
Sometimes business owners fail to see new risks as their businesses grow. They are fish in the fishbowl. Therefore, the owner may need someone external to the company to peer in. Risks must first be identified before they can be lessened, but the one gazing in may need special viewing abilities. An accountant may understand debits, credits, and even accounting standards but not have the ability to see internal control weaknesses. So hire a CPA or CFE with the appropriate skill set.
Just as medical doctors specialize in particular health-related areas, so do CPAs and CFEs focus upon specific accounting niches. When I had a brain tumor, I did not consult with a general practitioner; I saw a brain surgeon. He saved my life (thanks, Dr. Williams). Using the right accounting professional to review your internal controls may save your business.
10 Steps to Reduce Theft
As your business grows, here are suggested steps to create a safer accounting system:
- Know that the risk of theft increases as complexity increases (often a result of business growth)
- Hire a professional with fraud prevention experience and training
- Have the expert map your accounting processes with an emphasis on control weakness identification
- List and prioritize the identified internal control weaknesses
- Determine how you will deal with each risk (accept, transfer, or mitigate)
- Develop controls to address the weaknesses
- Develop a plan to monitor the internal controls (monitoring can range from daily to once a year depending on the threat)
- Provide periodic internal control reports to management and those charged with governance
- Reassess risks at least annually and repeat the above
- Sleep well–-you’ve taken the right precautions
If you are a new business (and you feel like the above is more than you need), click here for two simple steps to minimize the risk of theft.
One last thought: Review your insurance coverage. When all else fails, having sufficient theft coverage will help greatly.
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