Hi <<First Name>>
Trust is not an internal control!
They say hindsight is always 20/20, but you don't have to be looking back to spot red flags around internal controls. How many times have you heard someone say "it's okay... I trust you." Sadly, it is often the people we trust the most, our friends and family, that turn out to be not who we thought they were.
Trust is not an internal control. People often make snap decisions based on trust instead of taking a controlled and systematic approach to ensuring the proper protocols are being followed. By taking just a little time to do set up control we can prevent fraud in our small businesses.
Stephen M.R. Covey wrote a book called The Speed of Trust that helps explain how trust can be both good and bad. In his "Smart Trust" Matrix, he explains the difference and results of Blind Trust, Smart Trust, No Trust, and Distrust. If your internal controls are relying on Blind Trust, you are likely leaving yourself wide open to fraud, theft, and a multitude of other red flags you try to avoid. Smart Trust, however, allows us to be balanced in our approach to getting things done. With Smart Trust you're not saying, "it's okay... I trust you," but rather, "I trust that the job will be done safely and effectively because we'll be following the proper procedures".
Now I'm Scared! What proper procedures?
Don't panic. Get productive. We have some great resources to help you start designing your internal controls right now. There are many ways to learn about internal controls and how to prevent fraud. Start by educating yourself, then follow up with designing step-by-step processes for your needs. Here's an event that will help, hosted by the Southern Oregon Bookkeepers Association:
"March is Fraud Prevention Month! Talk to vendors and sponsors who advocate and take action for the prevention of fraud. Learn what you can do to protect yourself and what measures can be taken to prevent fraud all around you, everyday, even online. Discover how businesses and technology companies work to guard your information. The SOBA Fraud Prevention Fair is a great place for networking and being present in your community. Learn from our showcase presenters over the course of the event, and start implementing better business practices and personal awareness immediately." -SOBA
Want to be ahead of the class and do some advanced reading?
Check out the Polymath blog on Internal Fraud Prevention. There are many ways to learn about internal controls. Take initiative and build procedures that will help protect you and your small business. Don't just think about it, do something right now, proactively, to prevent fraud.