How a CFO Advisory Helps with Fraud Protection
How taking advantage of a CFO advisory team can help to prevent fraud
Today, corporate fraud happens all too often in the expense department. Within SMBs, expense fraud is particularly common. Businesses with fewer than 100 employees experience roughly double the rate of expense fraud than larger companies do. Oftentimes, this is due to loose policies around expense reporting and resource-strapped accounts payable teams who can’t provide much expense oversight. For small to mid-sized businesses, having a strong CFO advisory service in place can go a long way in preventing expense fraud before it gets out of control.
Expense fraud often acts as a gateway to other forms of corporate fraud. It’s easy for an employee to write off an extra meal during a work trip, and once they see these padded expenses go undetected, the size of the fraudulent line items can begin to grow.
Because of the insidious nature of expense fraud, it’s important to set a tone of professionalism and establish an environment of oversight before fraud can take place. If employees sense that the A.P. team is harried and just barely scraping by, it can be tempting to test the waters on an expense report. However, when a company brings in a CFO advisory team, they can foster a culture of high standards from the top down.
CFO’s and their support teams play an important role in making employees think that every financial transaction will be highly scrutinized, and a CFO advisory team who are perceived to have a great deal of integrity can set the tone for the rest of the company.
While perception is important, so are processes. Weaknesses in internal controls account for nearly half of all corporate fraud schemes. CFOs have the experience and expertise to establish the controls that will be most effective. Here are some basic controls every small business should have in place to prevent expense fraud:
Corporate cards: While it may seem counterintuitive to give employees access to credit, having visibility is often worth it. The A.P. team can review all transactions and statements, which offers much more insight than self-reported transactions from employees’ personal cards or cash expenses. Corporate cards also allow the company to set lower credit limits, forcing employees to communicate formal requests when they need access to more funds.
Expense reporting tools: Automated expense reporting tools like Expensify and Certify automate much of the A.P. team’s processes. They can also provide some of the ‘muscle,’ that strained A.P. teams just don’t have the energy or confidence to enact; for example, many of these tools will not allow an expense to be submitted without ample documentation, such as exact addresses when reporting mileage. Finally, they can set limits for spending on flights and hotel rooms and automatically cross-reference receipts to prevent double-dipping. For smaller businesses on a budget, Divvy offers this service, plus expense cards, for free.
Strict expense protocols: Small businesses can often operate without formal processes, but as the company grows, this becomes problematic. Every business should establish an expense policy that covers per diem spending limits, travel policies for flight, hotel, and rideshare costs, and strict maximums on items like drinks, gifts, and dinners with clients.
A perception of close auditing: Again, perception matters. Ensuring your A.P. team is following up and asking questions with any expense issues is great. Having the CFO meeting with employees when an expense protocol is broken acts as a reinforcement of your expense policy.
As you and your team plan for the future of your company, consider the controls you have in place, the structure of your reporting, and the security you are currently using to keep your data and employees safe. We ensure that your accounting is audited regularly and with precision. Reporting through an outside partner—like Turning Point’s CFO advisory teams—can stop fraud in its tracks.
For more information on how our teams of Accountants, Controllers, and CFO’s will help you prevent fraud, reach out to one of our dedicated team members today.
