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7 Ways to Prevent Fraud and Employee Theft in Your Real Estate Business

One of probably the most vibrant recollections I’ve from once I in spite of everything changed into conscious about what precisely my dad’s did for a residing used to be when he realized his bookkeeper were stealing from him. This were occurring for a number of months before his assets supervisor changed into suspicious and began taking a look into the transactions nearer.

My dad’s bookkeeper were paying for her telephone invoice, new tires, and a bunch of different issues on my dad’s account. In the tip, she had embezzled over $5,000 from him. Not the worst loss on the planet, however sadly, this type of factor is all to not unusual. And it may be a lot worse than what came about to my father again within the past due ’90s. For instance:

And on and on and on.

Will Yakowizc, writing for, describes a up to date find out about that presentations just how harmful worker embezzlement will also be. The results of which have been:

“Smaller businesses are more at risk to employee theft. The report finds that 55 percent of embezzlement cases occurred at businesses with 100 employees or less, with an average loss of $1.3 million.”

Lose $1.Three million right here, $1.Three million there—and at some point, you’re speaking about actual cash!

Needless to mention, accounting is very vital for marketers. Still, it’s unfortunately overpassed a lot of the time. And handiest is accounting extraordinarily vital, keeping up inside controls together with your accounting, bookkeeping and accounts payable/accounts receivable is extremely vital as you begin to develop. It is those controls that may safeguard you against attainable fraud.

The first key factor to take into consideration is what is named the “Fraud Triangle.” The Fraud Triangle has 3 key elements which in combination increase the chances that an worker will thieve from you. The 3 components are:

  1. Pressure: Is the individual in query under some type of monetary power that will be aided via stealing?
  2. Rationalization: Is there some way for the individual to rationalize the crime? (I.e. is the boss a nasty particular person or does the corporate make far more cash on some product than is “fair”?)
  3. Opportunity: Is there a very simple means for the worker to devote fraud or embezzlement?

Or in visible form, it seems like this:

Yeah, I don’t know why it needs to be a triangle both.

Related: 4 Steps to Take When Scaling Your Real Estate Business Into a New Market

Anyway, it’s exhausting to seem out for power. But referring to explanation, this could clearly be one more reason to regard your workers (in addition to your contractors, distributors, purchasers and the like) smartly. You shouldn’t allow them to stroll everywhere you, in fact. But when you deal with anyone like rubbish, the explanation monster in them will very most likely get to paintings.

We’re going to center of attention most commonly on alternative, despite the fact that. For that, we’ll flip to the seven key laws for inside keep an eye on accountants have get a hold of that guard against getting robbed via workers (or companions and, in some instances, contractors, distributors, and the like).

1. Separation of Duties

Do you could have the similar particular person paintings on accounts receivable and accounts payable? Do you could have the similar particular person get ready the books and audit them? Early on, a few of this can be unavoidable, however as you develop, you need to split duties up to conceivable (particularly accounts receivable and accounts payable as though the ones are executed via the similar particular person, there’s a nice alternative for an worker to embezzle cash).

For small companies who can’t separate all of those purposes, sharing duties between two or extra other people can no less than mitigate this chance.

2. Access Control

This is just controlling get right of entry to to more than a few portions of your accounting gadget. You must all the time have your accounting and assets control tool password protected (and the password must by no means be “password”). You must additionally stay delicate monetary bureaucracy under lock and key. And don’t just handout those passwords/keys to just any person.

3. Physical Audits

This is actually counting money or stock to verify the entirety for your gadget is in truth there. You shouldn’t have a lot free money placing round (and when you do, you must deposit it at the moment!). But it’s possible you’ll stay sure issues in stock, like home equipment and different provides. If you do, you must without a doubt carry out periodic bodily audits. Shockingly, I’ve heard a couple of tales about such issues being stolen!

4. Standardized Documentation

The extra you standardize the entirety, the easier. That is going for paint colours for your leases, in addition to such things as invoices, expense studies, time playing cards, and so forth. It additionally is going for paperwork which can be only stored on-line.

While this isn’t associated with fraud, we require every of our contractors to publish their bid on our scope of labor form. Earlier, we had been all the time evaluating apples to oranges as every contractor submitted their bid on a distinct form and every incessantly left a couple of pieces unquoted. Those unbid pieces could incessantly skew the price and had been incessantly exhausting to seek out and examine once we were given multiple bid on a challenge. When each and every bid is at the similar form, it’s simple to match who bid extra for what.

And this similar idea is going for fraud prevention as smartly. It’s a lot more straightforward for anyone to go off a false report if your entire paperwork glance other. It’s additionally tougher so that you can evaluation your data to seek out issues that can were overpassed if none of your forms are standardized.

5. Trial Balances

Double-entry bookkeeping is very important, however the books are handiest balanced once a month (typically). So, as recommends, “Calculating daily or weekly trial balances can provide regular insight into the state of the system, allowing you to discover and investigate discrepancies as early as possible.”


6. Periodic Reconciliations

You must reconcile your accounts frequently (I like to recommend no less than once a month) to verify the balances for your accounting gadget fit the deposits and withdrawals to your financial institution statements and to seek out any irregularities. Finding those irregularities is incessantly how fraud is exposed.

Related: How to Motivate Employees, Contractors, & Just About Everyone Else

7. Approval Authority

Most assets control companies gained’t cross over a undeniable buck prohibit (incessantly $1,000) for maintenance with out proprietor approval. I require that for any turnovers or rehabs over $5,000, our rehab supervisor will have to check off the scope and bid with me first. My brother seems to be over all of our outgoing tests before signing them and sending them out. I communicate to my dad and brother about upcoming acquisitions, giving them a possibility to veto them if want be.

The precise measures will range from business to business, however you must construct in approval authority safeguards for enormous transactions anywhere conceivable. This will stop the worst forms of fraud. After all, whilst small fraud hurts, giant fraud kills.


While your business is probably not on the level the place you wish to have to put in force all the above safeguards, you without a doubt wish to get started fascinated with this once you rent workers. Indeed, you wish to have to take into consideration it previously, as there are many different individuals who can thieve from you. Unfortunately, robbery is a cost of doing business at the present time. But like with all prices, you need to do the entirety you quite can to stay this one as little as conceivable.

How do you make certain your business is protected against robbery and fraud?

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