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Financial losses from corruption are on the rise, according to “Occupational Fraud 2024: A Report to the Nations,” published by the Association of Certified Fraud Examiners (ACFE). Nearly half the cases in the latest version of this report involved corruption. Even more alarming is the finding that the median loss for corruption cases grew by 33%, from $150,000 in 2022 to $200,000 in 2024.

Spotlight on corruption

The ACFE divides fraud schemes into three primary categories: 1) asset misappropriation (theft), 2) financial misstatement, and 3) corruption. Its 2024 report defines corruption as “a scheme in which an employee misuses their influence in a business transaction in a way that violates their duty to the employer in order to gain a direct or indirect benefit.” Examples include:

• Conflicts of interest, such as purchasing and sales schemes,
• Bribery, including invoice kickbacks and bid rigging,
• Illegal gratuities, and
• Economic extortion.

Which industries and departments are at high risk for corruption? The ACFE report found that corruption was the most prevalent scheme across all industry sectors — and in all departments where fraud perpetrators commonly work.

Anti-corruption measures

Given corruption’s universal threat, consider these four steps to fortify your organization’s defenses:

1. Strengthen internal controls.

While physical security measures — such as locks, passwords, and video cameras — can thwart asset theft, other control procedures may reduce opportunities for workers to engage in corrupt behaviors. For instance, formal vendor management policies can be particularly effective against kickbacks. Key elements to cover are:

• A formal vetting process to ensure only legitimate vendors are approved,
• Competitive bidding requirements to prevent favoritism and inflated pricing,
• Conflict-of-interest policies that require employees to disclose personal relationships with vendors, and• Payment controls that match invoices with purchase orders and delivery receipts to confirm the legitimacy of transactions before they’re processed.

Other examples of cost-effective internal controls that can help counter corruption schemes are job segregation and rotation, dual authorizations for large payments, mandatory time-off policies, employee training programs, and written job descriptions and ethics policies.

2. Leverage automated accounting software.

Modern accounting software can be a powerful tool against corporate corruption. These systems track financial transactions in real time, providing visibility and control over where money is going — and whether it’s going where it should. Automation reduces human error and minimizes opportunities for manipulation by ensuring consistent data entry, processing, and reporting. Many platforms offer built-in alerts for unusual activity, such as duplicate invoices or unauthorized vendor payments.

For example, expense tracking systems can automatically categorize spending patterns and flag anomalies, such as out-of-policy purchases, high-dollar transactions just below approval thresholds, or spending spikes in specific departments. AI-driven fraud detection tools go a step further by learning from historical data to identify subtle patterns of suspicious behavior that traditional systems might miss, such as repeated transactions just under approval limits (a red flag for invoice splitting), frequent payments to new or inactive vendors, round-dollar transactions, and transactions outside normal business hours.

Many accounting systems integrate with enterprise resource planning software. This gives managers a holistic view of operations and allows cross-referencing between purchasing, payroll, and inventory systems. Integration helps uncover conflicts of interest, fraudulent billing, and other corporate corruption schemes that might otherwise go undetected when data is siloed. Additionally, some platforms allow for role-based access controls and automated audit trails, ensuring only authorized personnel can initiate, approve, or modify transactions, and that any changes are fully documented.

3. Proactively manage financial data and employee activity.

Managers should adopt a hands-on approach to detecting and preventing corporate corruption practices. This includes regularly reviewing financial reports generated by your accounting systems for inconsistencies and monitoring high-risk employees with access to company funds and accounting records.

All employees must follow strict approval and documentation procedures to prevent unauthorized transactions. Detailed invoices ensure clarity on the goods and services provided. Business justifications for significant expenses add an extra layer of accountability. Limiting cash transactions in favor of electronic payments maintains transaction records and enhances financial transparency.

4. Audit your financials.

External audits provide independent reviews of financial transactions, helping managers identify and address irregularities. You don’t necessarily have to wait until year-end for an external audit, however. Consider conducting periodic surprise audits throughout the year as an added measure of protection — or hiring a forensic accounting specialist to investigate suspicious activity.

 

Let’s assess your risks

When did your organization last update its systems against the mounting risk of corporate corruption? Too often, business owners and managers assume that corruption only happens in foreign countries or large multinational companies. But the recent ACFE report provides a sobering reminder that corruption can affect any company, regardless of size, location, or industry.

Contact us to help ensure your organization is protected against these schemes. We can assess vulnerabilities, implement robust controls to strengthen your accounting systems, and investigate anomalies or suspicions of corrupt behavior.

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Accurate financial records help business owners manage cash flow, tax obligations, and strategic planning. QuickBooks® is one of the most widely used bookkeeping software solutions for small and midsize businesses, offering a comprehensive suite of tools designed to simplify financial management and support business growth.

Why QuickBooks stands out

QuickBooks offers several advantages over other accounting software solutions. It’s affordable and adaptable to the needs of businesses across various industries. QuickBooks offers tailored solutions whether you’re a professional services provider, contractor, manufacturer, nonprofit, retailer, wholesaler, or distributor.

QuickBooks is also user friendly and robust. It enables businesses to track income and expenses, create professional invoices and generate insightful financial reports. With its project and job costing capabilities, businesses can estimate and monitor expenses associated with specific jobs, ensuring that profitability remains on track.

For businesses dealing with payroll and tax obligations, QuickBooks simplifies the process by handling payroll, sales tax, and income tax calculations. It also includes inventory and fixed asset management, helping businesses maintain accurate records and streamline operations. Additionally, QuickBooks empowers business owners with data-driven decision-making through financial reporting and forecasting tools. By analyzing past performance and predicting future trends, companies can create more accurate budgets and adjust their strategies as needed.

Another key feature is QuickBooks’ seamless integration with other business platforms, such as e-commerce sites and payroll management platforms. QuickBooks connects with these systems to ensure smooth data synchronization. This connectivity reduces the risk of errors and minimizes the time spent on manual data entry, freeing up valuable resources for more critical business functions.

Collaboration made easy 

Beyond its bookkeeping capabilities, QuickBooks serves as a valuable collaborative tool for business owners and financial professionals. The software houses real-time financial data, which your external accounting team can securely access to review your company’s latest records without constant back-and-forth communication. This real-time access enhances financial accuracy and allows accountants to provide timely advice.

By collaborating through QuickBooks, you’ll gain deeper financial insights, optimize tax planning strategies, and ensure compliance with federal and state regulations. Your accountant can also review financial reports to identify potential discrepancies, errors, and areas of improvement. This helps you to focus on day-to-day operations while your accounting team manages the complexities of reporting and compliance.

Is QuickBooks right for your bookkeeping needs?

Whether you’re launching a startup or managing an established enterprise, choosing the right bookkeeping software solution is crucial for maintaining efficiency and profitability. There are many off-the-shelf options available today. Our team has extensive experience guiding business owners and managers through the selection process. We can help you choose the right solution for your situation and optimize the software’s features to maximize its benefits. Contact us for more information.

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Financial forecasting provides a roadmap to guide your organization on the path to success. Forecasts support strategic planning by helping you allocate resources efficiently, manage risks effectively, and optimize capital investments. However, today’s dynamic marketplace is uncharted territory, so you can’t rely solely on historical data. Reliable forecasts also consider external market trends and professional insights. Here are some tips to strengthen your forecasting models and help you avoid common pitfalls.

Determine the optimal approach

What’s the right forecasting method for your situation? The answer depends on several critical factors, including:

Forecast length. Short-term forecasts (that cover a year or less) often rely more heavily on historical data. These plans focus primarily on the organization’s immediate needs. Long-term forecasts require more qualitative inputs to account for uncertainties, such as market disruptions, economic shifts, and changing regulations and consumer behaviors. These plans are essential to support strategic decisions and attract funding from investors and lenders. The longer your forecast period is, the more likely internal and external conditions will change. So, short-term forecasts tend to be more accurate than long-term plans. Long-term forecasts may need to be updated as market conditions evolve.

Stability of demand. Industries with consistent sales patterns may be able to use straightforward historical data analysis. However, those with seasonal and cyclical fluctuations might need to incorporate techniques like time-series decomposition to adjust for peaks and downturns. Companies experiencing unpredictable demand might consider using advanced forecasting software that integrates real-time sales data and external variables to enhance accuracy.

Availability of historical data. Techniques such as exponential smoothing require at least three years of data to generate reliable projections. For businesses launching new products or entering new markets, qualitative forecasting methods that incorporate expert opinions and market research may be more effective.

Business offerings. Companies with a wide range of products and services may prefer simplified forecasting models. Conversely, those with a focused product line can achieve greater accuracy with more complex statistical models.

Relying on just one forecasting model can be problematic. What happens if the forecast model gets things wrong? It may be more prudent to use a combination of approaches tailored to individual products and locations. Considering the results from multiple forecasting approaches can lead to better outcomes, especially when managing inventory levels.

Implement advanced forecasting techniques

Businesses seeking greater forecasting accuracy can implement advanced techniques, such as:

• Time-series analysis, which breaks historical data into trend, seasonal, and cyclical components to better understand patterns,
• Regression models that identify relationships between financial variables to improve prediction accuracy,
• Scenario planning that prepares best-case, worst-case, and expected forecasts,
• Sensitivity analysis that determines which forecasting assumptions have the greatest impact on expected financial outcomes, and
• Rolling forecasts that are continuously updated based on current data to provide greater flexibility and adaptability.

Increasingly, businesses are leveraging artificial intelligence and machine learning to enhance forecasting precision. These technologies analyze large datasets quickly, identify trends, and adjust predictions dynamically based on real-time changes. By integrating AI-driven forecasting tools, businesses can optimize their decision-making and gain a competitive edge.

Seek outside guidance

Financial statements are often the starting point for forecasts. Our accounting and auditing team can help ensure your historical data is accurate and then guide you through the process of developing reliable, market-driven forecasts based on your current needs. From developing realistic assumptions and reliable models to tracking forecast accuracy and updating for market shifts, we’ve got you covered. Contact us for more information.

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Running a small business often requires periodic cash infusions, and knowing how to secure the right funding can determine whether your business succeeds or struggles. Let’s explore the three primary types of funding available to small businesses: debt, equity, and hybrid financing.

Debt: Borrowing to grow

Debt financing involves borrowing money and repaying it with interest over time. This category includes traditional bank loans, such as term loans, lines of credit, and Small Business Administration loans.

One key advantage of debt financing is that you maintain ownership of your business. However, loan payments can strain cash flow, and lenders often require collateral. If you fail to make payments, creditors can claim ownership of the collateral and, in some cases, sue your business or the owner(s) personally for repayment.

Debt financing works best for businesses with steady revenue streams to ensure timely payments. By retaining ownership, you preserve control over decision-making, but it’s critical to evaluate whether your cash flow can sustain regular loan payments.

Equity: Trading ownership for capital

Equity financing involves selling part of your business to investors in exchange for funding. Common sources include:

• Angel investors,
• Venture capital firms, and
• Crowdfunding platforms.

Unlike debt, equity financing doesn’t require repayment. But you relinquish some ownership and possibly a portion of future profits.

This approach may benefit start-ups or high-growth companies that can’t qualify for traditional loans due to a lack of profitability or solid credit history. While equity investors can provide valuable expertise and connections, you’ll need to weigh the trade-off of shared decision-making and reduced control over your business.

Hybrid financing: Combining debt and equity

Hybrid financing blends elements of debt and equity. Examples include convertible notes (debt that can convert into equity under specific conditions) and revenue-based financing (where repayment is tied to a percentage of your future revenue). These options are often more flexible, aligning payment terms with business performance.

Hybrid financing is ideal for business owners seeking customized funding solutions. It allows you to leverage the benefits of debt and equity. However, the terms can be complex and require careful negotiation.

Financial statements matter

Accurate financial statements are essential to securing funding. Lenders and investors will require a detailed financial package that includes the following three reports:

• Income statements to highlight revenue, costs, and profits,
• Balance sheets to summarize assets and liabilities and
• Statements of cash flows to show how money moves through your business.

In addition, lenders or investors may ask for supporting reports, such as accounts receivable aging, breakdowns of major expense categories, and information about owners and key employees. These documents provide insight into your business’s financial health and operations, helping potential funders assess the risks and potential rewards of their investment.

Most lenders and investors require at least two to three years of historical financial data and projections for the next two to three years. These reports should tell a clear, compelling story about your business’s financial stability and growth potential.

What’s right for your business?

Selecting the right financing option depends on your business model, growth stage, long-term goals, and risk tolerance. As your business’s needs evolve, it may use a combination of debt, equity, and hybrid financing. We can help you maintain accurate financial records and understand the pros and cons of each option. Contact us to help you make informed decisions to fund your business’s growth.

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Auditing standards require auditors to identify and assess the risks of material misstatement due to fraud and to determine overall and specific responses to those risks. Here are some answers to questions about what auditors assess when interviewing company personnel to evaluate potential fraud risks.

What’s on your auditor’s radar?

When planning audit fieldwork, your audit team meets to brainstorm potential company- and industry-specific risks and outline specific areas of inquiry and high-risk accounts. This sets the stage for inquiries during audit fieldwork. Entities being audited sometimes feel fraud-related questions are probing and invasive, but interviews must be conducted for every audit. Auditors can’t just assume that fraud risks are the same as those that existed in the previous accounting period.

Specific areas of inquiry under Clarified Statement on Auditing Standards Section 240, Consideration of Fraud in a Financial Statement Audit, include:

• Whether management has knowledge of any actual, suspected, or alleged fraud,
• Management’s process for identifying, responding to, and monitoring the fraud risks in the entity,
• The nature, extent, and frequency of management’s assessment of fraud risks and the results of those assessments,
• Any specific fraud risks that management has identified or that have been brought to its attention,
• The classes of transactions, account balances, or disclosures for which a fraud risk is likely to exist, and
• Management’s communications, if any, to those charged with governance about its process for identifying and responding to fraud risks, and to employees on its views on appropriate business practices and ethical behavior.

Fraud-related inquiries may also be made of those charged with governance, internal auditors, and others within the entity. Examples of other people that an auditor might ask about fraud risks include the chief ethics officer, in-house legal counsel, and employees involved in processing complex or unusual transactions.

Why are face-to-face meetings essential?

Whenever possible, auditors meet in person with managers and others to discuss fraud risks. That’s because a large part of uncovering fraud involves picking up on nonverbal clues.

Nuances such as an interviewee’s tone and inflection, speed of response, and body language provide important context to the spoken words. An auditor is also trained to notice signs of stress when an interviewee responds to questions, including long pauses before answering or starting answers over.

In addition, in-person interviews provide an opportunity for immediate follow-up questions. When a face-to-face interview isn’t possible, a videoconference or phone call is the next best option because it provides many of the same advantages as meeting in person.

How can you help the process?

While an external audit doesn’t provide an absolute guarantee against fraud, it’s a popular — and effective — antifraud control. You can facilitate the fraud risk assessment by anticipating the types of questions we’ll ask and the types of audit evidence we’ll need. Forthcoming, prompt responses help keep your audit on schedule and minimize unnecessary delays. Contact us for more information before audit fieldwork begins.