Why fraud detection and prevention in a business should not be set aside
Hello, it’s Scott Trevethan here from Scott Partners. I recently had the pleasure of interviewing Jeff Gordon from Prestige SME Business Solutions. In this interview, Jeff discusses how he helps businesspeople by educating them the importance of fraud detection and fraud prevention. Stressing out that every small business owner must implement systems and procedures to protect their businesses.
SCOTT: Welcome to the Small Business Heroes show, the show where we talk about everything to help your small business grow and prosper. Today, I’m talking to Jeff Gordon from SME Business Solutions.
Jeff is a qualified accountant with 25 years SME experience, mainly as a financial controller, including many achievements and innovations in a variety of businesses and industries that have experienced growth phases. Jeff started his business 2 years ago providing bookkeeping services and financial controller consultancy with a vision to empower business owners with financial information that they can understand and utilize to make good financial decisions.
Jeff’s philosophy is to assist business owners make more money, save time, and grow their businesses. His attention to detail is his ultimate skill. Nothing slips past his keen eye. He’s seen all the problems small business owners experience, such as not understanding their numbers, lack of cash flow control, and not maximizing profitability, so his business ensures good financial decisions are made, more time is focused on managing business and spending more time with your family.
Jeff, welcome to the Small Business Heroes show.
JEFF: Thanks, Scott. It’s a pleasure to be part of your great podcast interviews.
SCOTT: You’re very kind, and it’s great to have you onboard. Wow, with that bio, there’s so much there in terms of giving that timely fact-based information that people can make timely decisions with. That’s so important and empowering for small businesses. But something else we wanted to talk about today was fraud detection and fraud prevention. Is this much of a problem for our small business audience?
JEFF: Well, it is a very significant part of small business. Probably about 8% of small businesses experience this terrible thing that can destroy your business, your personal assets, your marriage. But unfortunately, a lot of business owners don’t take it seriously enough. I’ve seen it, I’ve read about it. I could tell you stories for hours and hours. I really try and educate people and tell them that you’ve got to take it more seriously. It’s just such an important part of protecting your business.
SCOTT: What sort of people are perpetrating these frauds on our small business heroes?
JEFF: You’ve heard of the lady in Queensland that stole $19 million over about 12 years. Fortunately, they recovered $16 million. You wonder how this can happen. Who is checking the figures? Did she have sole access to the bank account? There were no procedures in place. One of the funniest stories I’ve ever heard is a lady who defrauded her boss and was leasing a brand-new Mercedes, parking it next to the owner, and he didn’t even realize that something was wrong. And when he called in the auditors, they told him that she was defrauding him and he still didn’t believe the auditors. People, by human nature, are too naïve, too trustworthy. Every small business owner must implement systems and procedures which are very simple to protect their businesses.
SCOTT: Where are people going wrong? Is it just that they don’t have these processes or that they’re too busy looking at sales and marketing or production to worry about the finer points like control of your own bank account?
JEFF: Most businesses don’t have systems and procedures to start with, but in terms of fraud, there’s very simple things like having two authorizations on payments through EFTs, having a maximum amount that can go out of the bank account each day. With all this cloud-based software, I encourage my clients to look at the dashboard every day. Check your bank account, check what’s in your bank account, your debtors, your creditors. It’s just something that people take for granted, like “it’ll never happen to me,” like your house burning down and not having insurance.
SCOTT: We know and love Xero. It’s not the only accounting system – we certainly don’t endorse them, but we know and love Xero. With Xero we’ve got a whole bunch of backend fraud detection and prevention capabilities that are either coming or being built into it. What do you think of those sort of tools/
JEFF: There’s a couple of good ones there. You can go in – I think it’s called the Advisory one. You can check. If your payroll officer is accessing Xero at 11:00 at night, that would be a red alert. So there are a couple of things in Xero, but generally it’s putting in manual systems.
The number one thing is educating your staff about fraud. There’s things like getting an audit review every 6 months by an independent person. You can get bank statements posted to the managing director, because sometimes he doesn’t see it or they’re hidden from him. When you do stock takes, get one of the management team to be involved. There’s about 10 steps that I teach people. I’ve written an eBook on it, and if you follow those 10 steps, you can’t protect it 100%, but you’ll pretty well cover most of your bases.
SCOTT: That’s fantastic, Jeff. We’ll make sure that the link to that eBook, or at least the link to your website to get to that eBook is down below this video and interview as well, so that people can get access to that. Highly recommended reading.
Jeff, is there any type of business that’s more particularly exposed to fraud than any others?
JEFF: I think the real small ones where there’s one person controlling the whole finance section, that is a big danger. You’ve got the owner of the business who gets someone who’s been there for years, they trust them – when you’ve got one person with too much control, there’s a lot more risk. If you’ve got two or three people, there’s more chance of picking up things. If the payroll officer goes on leave and someone else does the payroll, there’s a chance they’ll pick up something. But it’s the real small ones where there’s one person controlling a lot of things.
There was a fascinating story with the Stonnington Council where the purchasing officer didn’t have to get approval to buy purchases up to a certain limit, and he was buying a lot of alcohol and selling it to certain people. About $700,000 was stolen and put to repair the Malvern town hall. Now, can you believe that the CEO of the Council, the financial controller, nobody looked at the account and said “I think our repairs are pretty high to the Malvern town hall”? So when you’ve got one guy controlling a lot of things, that’s the problem.
SCOTT: Absolutely. What sort of processes do you use to go in and detect whether there’s a fraud there, and then to advise on preventing it?
JEFF: Basically I generally, like in most things, you’ve got to ask as many questions as possible. Understand how they go about things, are people taking holidays, who does what. Then I go away and I write a report on what processes they need to put in, and I make sure they’re implemented. That’s the best way to do it.
SCOTT: You’re not only about fraud prevention and fraud detection, Jeff. Tell us a little bit else about what Prestige SME Business Solutions actually does.
JEFF: The other review I do is a financial diagnostic audit review. I offer a free one to potential new clients, and I analyze their business from top to bottom. I’m the New Age person, not the number cruncher or bean counter. I’m looking to make them more money and save costs, and I’ll go through all their reports and try and find areas where I can improve their profitability. Because basically, I love helping people, improving businesses. The data processing and number crunching, that’ll be phased out in the future. Now in your business, you need someone who can make a difference to your business and your lifestyle.
I’m a very analytical person; I’m very forensically minded. I love trying to find things. I tend to sit down with the owner and go through everything. I saved one company $20,000 in 3 months. That’s a lot of money.
SCOTT: That doesn’t surprise me at all, Jeff. I know with everyone so busy nowadays, we’ve got lots and lots of tools to make our small business lives so much easier; we seem to tend to neglect those little things like our operating expenses and even our cost of sales. There’s got to be ways that we can save money, and we really owe it to ourselves and our stakeholders to absolutely do everything we possibly can. But jeez, it’s just the last thing on the list. So someone like you coming in and helping small business owners to do that – I’d be very surprised if you couldn’t give them a tremendous return on their investment.
JEFF: Most managing directors or general managers are generally good at sales and management. In the finance area, they’re not that strong, unfortunately, and they tend to not treat it as importantly as they should in getting in an expert.
A good example is Tony Robbins, the most famous speaker in the world. He hated accounting. I listened to his speech. He hated accounting. He lost $100 million – true story – because he had a CFO, he didn’t read his reports, and he trusted the guy, and he learned a big lesson. So you need to get in an expert where you’re not strong in a certain area. All these famous successful people have got experts in the areas that they need. The business owner can’t do everything, can’t be good at everything.
SCOTT: Absolutely. Jeff, it sounds great. How can people who are listening to this or watching this right now get in contact with you?
JEFF: They can go to our website, which is prestigesme.com.au. Either email me or phone me. They can download the fraud prevention eBook. I’m happy to have a chat, do that diagnostic financial audit, which is free. I guarantee the money people will spend with me over a 12 month period, a lot of it I will get back for them in terms of the value I bring to their business in making them more money and saving them money.
SCOTT: I’ll go further than that, Jeff. I guarantee – well, I don’t actually physically guarantee, but I am absolutely convinced that you will return much, much, much more than your cost as a benefit for the firms engaged in your services. It just has to be.
Thank you so much, Jeff, for coming onto our Small Business Heroes show today. If you’d like any of that information, it’s down below, the links to the website and the eBook on the fraud prevention. Please go down and have a look at it.
Thank you very much for listening today. My name’s Scott Trevethan. I’m from Scott Partners and Go Global Bookkeeping Services. You’ve been listening to the Small Business Heroes show. If you want more information, please go over to our Facebook page and you can join our Small Business Heroes Facebook group. We’ve got lots of information, including these interviews that come up all the time. Every week we’re going to be launching one of these videos with real hints and tips to small business. You can go over to the Scott Partners page and give us a like on Facebook, or why don’t you just head over to our website, which is www.ScottPartners.com.au.
I’m Scott Trevethan. You’re listening to Small Business Heroes. Thanks, Jeff.
JEFF: Thanks, Scott. It’s a pleasure.