Preventing Fraud and Employee Theft in Real Estate

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.