Small businesses are often more exposed to fraud than large companies, not less. One trusted person may handle everything from opening the mail to reconciling the bank account, and nobody double-checks. The good news: a handful of simple habits make a big difference.
The three things that let fraud happen
Fraud usually needs pressure (someone has a financial need), opportunity (weak controls) and rationalization (they convince themselves it's okay). You can't control the first or the third. You can control opportunity.
Controls that work for a small team
Split the duties
The same person shouldn't set up vendors, approve bills, send payments and reconcile the bank. If you only have one bookkeeper, the owner can take over one step, such as approving payments or reviewing the reconciliation. Outsourcing part of the process also creates natural separation.
The owner reviews bank statements
Look at the actual bank statement each month, not just a report. Scan for unfamiliar payees, round-number transfers and checks out of sequence.
Reconcile every month
Bank and credit card accounts should be reconciled monthly by someone other than the person who makes payments, or reviewed by the owner.
Lock down vendor changes
Fake emails asking you to "update our bank details" are one of the most common scams. Confirm any change to vendor payment information by calling a phone number you already have on file, never one in the email.
Use bank security tools
Positive pay, dual approval for ACH and wire payments, and payment limits are inexpensive ways to stop unauthorized payments.
Watch payroll
Review payroll registers for employees you don't recognize, unusual overtime or changes to direct deposit accounts.
Require time off
Schemes often come to light when the person running them is away and someone else covers the work.
Warning signs
- An employee who resists sharing duties or never takes vacation
- Books that are always "almost" reconciled
- Missing documents or unexplained adjustments
- Vendors with only a P.O. box or a name close to a real vendor
- Customer complaints about payments you don't show as received
If you suspect fraud
Don't confront the person first. Preserve records, limit their system access quietly if needed, and talk to your attorney and insurance carrier. Many business policies include employee dishonesty coverage with notice requirements.
Our accounting management and AR/AP services are designed with these controls built in.
This article is general information, current as of September 2026, and is not tax, legal or financial advice for your situation. Tax rules change often. Talk with us before acting on anything here.