Keeping your own financial house in order is the best way to maintain your assets and finances.
Is there validity to the “trust, but verify” management style?
No matter how much you trust your employees, including those who handle cash, receivables, and inventories, you also need to verify the financial work they do. “Segregation of duties” is a term used frequently in the world of finance: It means that processes should be broken down so no single person is responsible for every part of that process. This reduces the possibility of someone engaging in theft or other fraudulent activity.
According to the Association of Certified Fraud Examiners’ 2022 Report to the Nations, which summarized over 2,110 fraud submissions from fraud examiners, the average organization loses 5% of revenue to fraud each year. And nearly half of fraud cases occurred due to a lack of internal controls or an override of existing controls.
Keeping your own financial house in order is the best way to maintain your assets and finances.
Case in Point: Monitor Your Finances
Bronswick Benjamin, an NSCA Member Advisory Councilmember, worked with a large, profitable company that lacked payroll supervision. When the long-time payroll clerk realized this, they started writing and cashing duplicate checks for employee vacation pay. This resulted in losses of more than $100,000 annually. Because there was little supervision, review, or logic, cash disappeared for nearly a decade.
In another instance of overreliance on a long-time trusted bookkeeper, Bronswick Benjamin helped a business owner discover that the company’s bookkeeper had been overpaying their own utility bills each month. Each quarter, they asked the utilities to refund their overpayments. During a 10-year span of time, the owner asked only once about multiple payments—and never bothered to verify the answer he received.
As a business owner or manager, you don’t need to treat your employees as suspects. Instead, you need to treat your assets as the value they represent. Trust, but verify.
