Real estate business is a real profit machine. A
successful real estate businessman should beware of frauds and employee thefts.
Apart from fraud deals and customers, employees may also be involved in theft
from the company. There could be a number of reasons for such an act such as
financial pressure, rationalization or opportunity. It is difficult to find out
if an employee is under financial pressure. Rationalization however is depicted
through behaviour so the owner should treat all the employees equally such as
the contractors, vendors and other clients etc. They should not be given extra
leverage but should also not be treated as garbage. The internal control of the company should be
strong. For this purpose, we may adopt certain policies. Generally small
business at a greater risk to employ theft as the employees are given
interrelated tasks. Accounting is one of the most important things for
entrepreneurs but it is overlooked most of the times. Maintaining internal
controls for accounting and bookkeeping is important to a growing business.
Separation of Duties
If a single person is given multiple jobs, he has a
lot of things under his control. This authority let the employee have extended
access to the resources of the company. For example, if the same employee is
given the work on accounts receivable and accounts payable. Such inter related
tasks that provide extra access to the employee. Such access can give a great
opportunity to an employee to embezzle money. In case of small businesses, we
cannot separate all these functions to mitigate this risk in a small company a
single task should be shared between two or more people.
Access Control
The accounting
system of the company should have a controlled access. The accounting and
property management software should be password protected. The financial paper
work should also be kept in safes. The sensitive financial paper works and
passwords should not be shared with just anyone.
Physical Audits
The company should not have loose cash hanging
around. Good amount of money should be deposited away. One should also perform
physical audits regularly as certain things in the inventory and supplies are
around all the time.
Document Standardization
It is better that everything in the office is
standardize such as invoices, expense reports and time card etc. It is also
important to prevent frauds as it is easier for people to pass a false document
if all of the documents look different. It is also difficult to find a certain
document from the record if no standard format is being followed.
Trial Balances
Double entry bookkeeping is essential. Calculating
daily balances provide insight of the system and helps in the discovering and
investigating inconsistencies as soon as possible.
Periodic Reconciliations
Reconciling accounts on regular basis is most
recommended to ensure the balance in the accounts match the deposits and
withdrawals on the bank statements. It is easier to find irregularities if such
an approach is used.
Approval Authority
Property management companies generally have a set
financial limit. If actions are to be performed beyond that limit, the approval
of the owner is required for example repairs over thousand dollars are approved
by the owner. The exact measures taken to avoid frauds vary from company to
company.
Conclusion
It’s not necessary that all types of businesses can
implement all the above mentioned measures to prevent fraud and employ theft
but some of them can be applied according to the nature and type of business.
While hiring employees all possible investigations should be done to minimize
such theft and fraud.