Strategic Financial Leadership, Inc.
Providing the Solid Answers You Need
Expert Advice for Small Business
P.O. Box 309
Loveland, Ohio 45140-0309
phone:513.697.6724
fax:513.697.6726
blynch@sflservices.com
New Ways Of Looking At People Who Commit Fraud
Since the 1950s, fraud investigators have used what they call the “Fraud Triangle” to try to understand why people commit financial crimes: financial need, opportunities due to their positions and the ability to rationalize their behavior. But those points do not fully explain the motives of highly compensated executives and business owners who commit fraud.
Using the acronym MICE, here’s a newer way of explaining people’s motives for committing fraud, as explained by Fraud Magazine, a publication of the Association of Certified Fraud Examiners:
Money: Fraudsters often put at risk six-figure salaries and prestigious positions to get more money.
Money: Fraudsters often put at risk six-figure salaries and prestigious positions to get more money.Ideology: Fraudsters frequently believe the end justifies the means.
Ideology: Fraudsters frequently believe the end justifies the means.Coercion: Fraudsters sometimes feel coerced into doing things they know are wrong.
Coercion: Fraudsters sometimes feel coerced into doing things they know are wrong.Ego/Entitlement: This is when fraudsters commit crimes to show off their ability to fool others or when they feel
Ego/Entitlement: This is when fraudsters commit crimes to show off their ability to fool others or when they feel entitled to take something that doesn’t belong to them.But your tools to combat fraud have not changed:
1.Maintain an ethical tone at the top.
Maintain an ethical tone at the top.2.Have a meaningful code of conduct.
Have a meaningful code of conduct. 3.Open communications with employees, vendors, suppliers and customers.
Open communications with employees, vendors, suppliers and customers. 4.Create a system to monitor employees’ work.
Create a system to monitor employees’ work. 5.Hotlines.
Hotlines. 6.Whistleblower protection. Otherwise, a hotline may be ineffective.
Whistleblower protection. Otherwise, a hotline may be ineffective. 7.Create a protocol for punishing perpetrators.
Create a protocol for punishing perpetrators. 8.Do not scrimp on the monitoring of contractual parties.
Do not scrimp on the monitoring of contractual parties. 9.Make sure you have an auditing system to detect fraud.
Make sure you have an auditing system to detect fraud. Bob Lynch, a Certified Fraud Examiner and Strategic Financial Leadership provide outsourced CFO services. For an initial consultation, Mr. Lynch can be reached at 513-697-6724 or blynch@sflservices.com.
© Strategic Financial Leadership, Inc. 2011
Six Tips For Working Effectively With Your Banker
An easy way to get your banker’s attention is to stop making loan payments or returning your banker’s phone calls. But that’s the wrong way to get your banker’s attention. Here’s the right way:
1.Make sure your bank receives your financial statements at least two days before your loan covenants require them.
Make sure your bank receives your financial statements at least two days before your loan covenants require them.2.Always include a Balance Sheet, Income Statement and Statement of Cash Flow.
Always include a Balance Sheet, Income Statement and Statement of Cash Flow.3.Analyze your financial statements before submitting them to the bank. You will be alerted to potential issues before the bank becomes aware of them.
Analyze your financial statements before submitting them to the bank. You will be alerted to potential issues before the bank becomes aware of them.4.Always include comparisons to prior periods, year to date totals and budgets or forecasts.
Always include comparisons to prior periods, year to date totals and budgets or forecasts.5.Prepare a memo analyzing your financial statements and submit it to your bank with your financial statements.
Prepare a memo analyzing your financial statements and submit it to your bank with your financial statements.6.Every quarter, update your three-year forecasts that accompany your Income Statement, Balance Sheet and Cash Flow and share them with your banker.
Every quarter, update your three-year forecasts that accompany your Income Statement, Balance Sheet and Cash Flow and share them with your banker.The better job you do in explaining your financial status to your bank, the easier it is for the bank to understand your business and lend you money. That also helps you to build a strong relationship with your banker. The stronger your relationship, the more your bank can help you build your business.
© Strategic Financial Leadership, Inc. 2011
Having Hope When The Economy Seems Hopeless
Our political leaders blame each other for our nation’s slow economic growth. But in doing so, they’re not leading. They are adding to the negative feelings about our country. Peter Drucker once said, “Effective leadership is not about making speeches or being liked. Leadership is defined by results, not attributes.”
So what can we do to generate results for our businesses?
1.Remember that there is a difference between the political will to act and economic hopelessness. While political leaders produce a surplus of the former, we don’t have to fall into the later.
Remember that there is a difference between the political will to act and economic hopelessness. While political leaders produce a surplus of the former, we don’t have to fall into the later.2.As individuals, we do not need permission from anybody to be successful. Despite the economic problems around us, our businesses can still thrive. Our success does not rely upon who our parents are nor does it depend on government programs.
As individuals, we do not need permission from anybody to be successful. Despite the economic problems around us, our businesses can still thrive. Our success does not rely upon who our parents are nor does it depend on government programs.3.To avoid long-term commitments to employees, companies are hiring independent contractors and outsourcing, instead of hiring. How can you take advantage of this trend to build your own business?
To avoid long-term commitments to employees, companies are hiring independent contractors and outsourcing, instead of hiring. How can you take advantage of this trend to build your own business?4.Economic cycles may have become less predictable, but they are still cycles. Down sides are always followed by upsides.
Economic cycles may have become less predictable, but they are still cycles. Down sides are always followed by upsides.5.Businesses are more about managing risk than producing products or services. The better you understand the risk your business faces, the more likely your results will be positive.
Businesses are more about managing risk than producing products or services. The better you understand the risk your business faces, the more likely your results will be positive.6.Bootstrapping is an old technique using repurposed equipment and supplies to move a business forward without having to depend on additional credit. What idle assets can you put to work generating income?
Bootstrapping is an old technique using repurposed equipment and supplies to move a business forward without having to depend on additional credit. What idle assets can you put to work generating income? © Strategic Financial Leadership, Inc. 2011
