Did you know that the average company loses 5% of its revenue to fraud every year? Small businesses suffer even greater losses. Are you aware that fraud prevention tactics of the past are losing efficacy as cybercriminals exploit technological advances? Revolutionary forensic accounting services – able to study the future and prevent fraud before it happens – are becoming an invaluable resource. The following content explores the intricacies of business fraud and forensic accounting, as well as the ways both have developed. Ultimately, the goal is to present the necessity of forensic accounting services in the fraudulent world we live in.

Businesses are fully aware of the dangers of fraud, as well as its unmistakable prevalence in nearly every industry. Do not assume that your company is exempt. Fraud is so rampant that if it has not impacted your business yet, it likely will without preventative measures. Businesses are also noticing a rise in fraudulent activity. In fact, when businesses were asked if they have detected more or less fraud in the past year, nearly 40% said more.

While most businesses are fully, painfully aware of the pervasiveness of fraud, many are unsure how to combat it, feeling vulnerable and unable to protect their company or patrons. On one hand, as businesses have attempted to combat fraud, fraud itself begins differentiating to a variety of new methods, from check fraud to corporate card fraud to the next technological advancement.

On the other hand, many companies prioritize customer satisfaction over security, simply accepting loss for the sake of happy customers. A 2018 global fraud report states: “Businesses are forever grappling with the tension between managing fraud and maintaining a positive customer experience. In most cases, the latter wins out, as evidenced by their willingness to accept higher fraud losses from authentication protocols that they concede might be deficient, but do not disrupt the user experience.”

In the midst of this battle between customer satisfaction and security, most businesses have utilized security measures that have been used for years, such as security questions, usernames, PIN codes, and passwords. Simultaneously, however, companies are learning that these methods of security are not always the best options. According to the same fraud report referenced earlier, nearly a quarter of consumers forget either a password or username within half a year. Ultimately, forgetfulness makes passwords and usernames a source of frustration to the average consumer.

Leading the way into new, more secure authentication methods requires a shift from the status quo, a huge, uncomfortable step for most businesses, unless many industries dive in at once. Yet, nearly 75% of businesses claimed that they “would be very interested in more advanced security measures and authentication.” The need is great. The desire is there. Yet, proactive steps to prevent fraud are widely ignored.

Not something to be ignored, however, fraud must by uncovered and prevented with a trustworthy, cutting-edge forensic accounting service.

What is forensic accounting and how can it solve the problem of fraud? Investopedia defines forensic accounting as a practice that “utilizes accounting, auditing and investigative skills to conduct an examination into the finances of an individual business. Forensic accounting provides an accounting analysis suitable to be used in legal proceedings.” Forensic accountants are carefully trained to preemptively notice fraud, often preparing a case that serves as evidence in a court of law. Forensic accountants must be able to investigate a company’s financial statements and transactions, comprehend the information, and – ultimately –check for suspicious activity.

Interestingly, forensic accountants are not only responsible for fraud prevention; this is a more recent role development. “Like any other job,” honors student Kristin Dreyer wrote, “Forensic Accounting has evolved with time. The industry has been affected by changes in technology, society, and the economy. As one aspect of the world changes so has the job of a Forensic Accountant. Continuing education is only one way in which Forensic Accountants learn how to adjust to new challenges. The profession has been around since the early 1900’s and has greatly altered the way fraud is discovered and handled since then.”

For years, forensic accountants have been utilized after natural disasters, divorce cases, or famous criminal proceedings. The capture of Al Capone is an example of a famous case featuring forensic accountants. The accountants noticed a large amount of illegal income, such as gambling, that was not claimed on his taxes. Tax evasion, oddly enough, was the crime that ended Al Capone’s reign. The heroes: forensic accountants.

Recently, as the prevalence of fraud has increased and changed with the times, forensic accounting services have been prompted to revolutionize and think proactively.

In the world of forensic accounting today, certain accounting firms have looked to the future, determined to stop fraud before it happens. This is the kind of forensic accounting service you should pursue for your businesses. Pay close attention to offered services, those that will eventually merge to create a proactive fraud strategy. These include assessment of vulnerabilities, mitigation of potential risk of loss, litigation support to re-coop losses, and determination of fraud risk tolerance.

Furthermore, in an ever-changing world, traditional fraud prevention techniques are losing. Passive, reactive accountant services simply will not cut it anymore. Cybercriminals are pervasive, utilizing technology to always be one step ahead. As a result, inhibiting fraudulent activity requires forward-thinking, proactive prevention.

Klein Hall is a full-service accounting and business advisory firm of the future. We know the frightening prevalence of fraud, and we know that internal control weakness is the reason for nearly half of all cases. This is why we look for systematic vulnerabilities throughout your business. Our fraud prevention services are designed to stop financial crime before it happens.

Fraudulent activity can happen to the very best of businesses. Don’t wait until it strikes. Contact us today to begin a discussion about a future free of fraudulent activity for your business.

If you own a small business and are only using an accountant to prepare your taxes – or aren’t using an accountant at all – you might be missing out on the key component that can allow your business to truly thrive.

An accountant can help at all stages of your company’s growth, from the creation of a business plan to incorporation to expansion. Below we’ll discuss how quality accounting can propel your business to success, as well as some of the potential pitfalls you may be risking by failing to take full advantage of small business accounting services.

Some million- and billion-dollar startups are a thing of legend: formed in a garage with a shoestring budget and no business plan. But for the vast majority of businesses, this fly-by-the-seat-of-the-pants approach will lead to an early and uneventful failure.

Having an accountant on board during the creation of a business plan can ensure that your business is set up in a way that provides the best growth opportunities. Deciding between an S Corp, C Corp, LLC, LLP, or another business structure can be tricky, and with the advent of the Tax Cuts and Jobs Act in late 2017, there are more tax advantages available for small businesses than there have been in decades. For example, business owners who receive pass-through income from an S Corp can take an additional 20 percent deduction on this income.

An accountant can work with you to determine which business structure makes the most sense and can catapult you to profitability quickly. And although accountants aren’t lawyers, they also provide some expertise when it comes to choosing a way to shelter or separate your personal assets from your business ones.

Once your business has started bringing in some income (and making expenditures), it can be easy to get lost in the flurry of activity. Before you know it, you may be having trouble determining just who owes what. Even if you don’t employ an accountant full-time, involving one in this setup process can help you get a workable system in place to track transactions in real time. Not only will this make it easier to keep a handle on your cash flow, but it can also make it much easier (and less expensive) to prepare your business taxes.

After you have a solid accounting system in place, an accountant can help you measure a wide range of business metrics. Simply knowing that you’re making money isn’t enough—you need to know how much money, where it’s going, and how your expenses are tracking business income over time.

An accountant can help you crunch this data to make forecasting decisions: hiring new employees, adding a 401(k) or profit-sharing plan, or taking other steps that can add costs in the interim but set you up for future growth

As every business owner knows, running a business is a 24/7/365 job. With the variety of pressing decisions that can face you on a daily basis, delegating accounting tasks like payroll, tax preparation, and other financial affairs can free up a major chunk of your time to focus on more big-picture issues.

If you’re ready to delegate some of your small business accounting tasks or just want some help setting up a business plan, the experienced accountants at Klein Hall CPAs can help. As a full-service CPA firm, we provide a wide range of services to businesses, governments, not-for-profits, and more. Contact us today to learn more about what we can offer your business.

The saying goes, “No one looks after your money like you do”—but when you’re a small business owner, handling your business’s accounting needs by yourself can quickly become unmanageable, leaving little time for the tasks that require more attention. Learn more about factors to consider when you’re mulling the transition to outsourced accounting, as well as some of the benefits you’ll be able to realize by outsourcing your business’s accounting services.

Not every business will realize every possible benefit from outsourcing its accounting services, but many businesses can benefit from at least some of the following perks.

At some point, just about every business owner must turn over his or her accounting and finance needs to someone else. Often, these duties end up with an internal employee—and when considering the cost of benefits, paid time off, payroll taxes, and office space, even a part-time accounting employee can consume a full-time salary.

Replacing an accounting employee can also be a costly prospect, requiring you and other members of management to take time out of your schedules to create job postings, interview candidates, and train new workers. By outsourcing your accounting services to an independent firm, you’ll be able to significantly reduce these costs and the time you spend managing your accounting services.

For businesses that utilize in-house accounting services, losing a long-term employee can be an incredible blow. Not only do you have to cover this employee’s duties until they can be replaced, but it can also take some time to get a new worker up to speed on your business’s processes—even if they have some prior accounting experience. Using an independent accounting service ensures continuity.

In-house accounting services may keep files stored on computer hard drives or an internally-accessible cloud. But unless you also have a strong IT department or your in-house accountants are well-versed in security upgrades, it can be tough to ensure that this data remains secure at all times.

By using an outside accounting firm, not only can you rest assured that your confidential data is under wraps, you should be able to access up-to-date information from anywhere with a secure wireless connection.  

Transitioning from in-house to outsourced accounting services can seem like an overwhelming process. Before you begin, it’s a good idea to think through the most important factors that should drive your decision. Here are just a few of the questions you may want to ask before you begin your accounting services search.

Some businesses spread accounting duties over several non-accounting employees, while others have a dedicated accounting or finance department. While most outsourced accounting services can easily scale to meet their clients’ needs, it’s important to have a handle on these needs to ensure that you’re getting the proper level of service.

If you’re devoting a fair amount of office space or resources to an accounting department, outsourcing these services may allow you to downsize to a smaller, less expensive office. On the other hand, if your accounting employees already work part-time or remotely, you may want to investigate other avenues of cost savings to see whether outsourcing these services will be cost-effective.

In many cases, you may be able to shift your accounting employees to other departments. Unfortunately, in other situations, outsourcing your accounting services can mean letting these workers go. Having a handle on what the transition will require can let you (and your employees) know what to expect when you commit to an outsourced accounting firm. 

At Klein Hall, we offer full CPA services to businesses of all types and sizes in and around the Chicagoland area. If you’re ready to take the next step in streamlining your business’s accounting needs, give us a call at (630) 898-5578 or fill out a contact form to see how we can help you.