When hiring, ask your colleagues for any referrals they may have, and whether you hire from a referral, or not, check references.

The trick to checking references is to make sure that there are no gaps in the resume, so check with each reference to determine the correct timeline. If there is a gap that cannot be adequately explained, let that be a red flag and move to the next candidate.

Remember two things: These folks have access to all the information about your business you give them and there are some very sophisticated ways to steal these days.

Your staff

Those who do not have direct contact with the money in your business can still steal your time and inventory.

If they are new hires, follow the same steps you would when hiring anyone new and check references and trust your instincts. These days there are also sophisticated background checks that can be done for all of your potential employees that include their presence on the Internet.

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Do you have a way of tracking your employees' hours? (Photo: iStock)

Safeguarding time

Are your employees working all the hours they say they are? If you aren't using some sort of punch clock, start to. It's still the easiest and simplest ways for employees to track how many hours they are there working.

Whether it's on the wall or on their computer or smart phone, they simply log in, work their day, then log out in the end. This works well even for employees on salary as just a simple way to keep track of what days they worked.

If appropriate for your business, have employees log their time by job or task. On a daily or no more than weekly basis, employees track their time, by whose job or which task they were working on.

This provides two things: It shows the actual hours by day of what they worked and it helps manage the hours spent on each job to show efficiency. Monitoring these reports will help you keep time in check, so set up a monitoring system that works for you. Make sure you check in with employees anytime you have a question … and even when you don't.

Safeguarding money

Let's review receiving money into your business.

In an ideal world, you would have two people opening the mail and signing off that a check or cash was received and that it was posted to a customer's account. However, in the real world, where we are doing more work with less employees, you have a couple of good options.

If you have a lot of payments received in the mail, you can buy a lockbox service, where all the payments are sent to a secure address and they have the internal controls to process the payments and put the funds directly into your account. This service does cost money, but if this sounds like it might work for you, then look into it.

The second option is simpler, yet effective if done properly: Open the mail yourself. Not all of it and not every day, but in the beginning open it several days a week and let everyone know you do it. When the mail comes in, mark down what checks come in and then review the next business deposit to make sure it's there. If there is an invoice past due, but you thought it was paid, investigate. A business's mail is full of lots of great information and if your employees know you are monitoring it, you are helping to safeguard your business.

Let's now review money going out of your business. For business owners, they are usually the only person who has the ability to sign checks, and this works just fine. There are circumstances when requiring two signatures on a check is a better idea. If the company is large with many different departments, requiring the double signature puts into place a control so that not one person has access to all of the funds without oversight. The other circumstance when two signatures are prudent is when there is no single “business owner” or if an organization has an extra fiduciary responsibility, such as a nonprofit.

Credit card refunds also need to be treated just like checks going out. There should be an additional level of approval before one can be processed and that can be as simple as having a second employee approve the process or as detailed as having you approve each one.

Lastly, there is no substitute for you, as the business owner, to review the bank statements and credit card statements yourself every month. Just like with the mail, if you have questions, ask them and let your staff know you are paying attention.

Safeguarding inventory

Is your company inventory and equipment locked up? Is only one person responsible for it? Are there sign outs required? What happens to outdated or obsolete inventory?

For inventory, the importance of doing a total inventory count as often as feasible, certainly annually, is imperative. After that, keeping an up-to-date list and doing spot checks periodically is very important to safeguarding your assets. Go back into the stock room. Grab an updated list and count some of your items, especially the most popular ones. Maybe you stock high-end electronics or maybe you stock the latest-desired fashion accessories. It's your inventory and your money, so check on it.

Finally, many small companies have employees doing many duties, and perhaps have been working for them many years. Look for ways to separate duties, watch payments come into your business, check staff efficiency and make inventory checks. If your staff sees you make these checks and perceives that you are watching everything, they will think twice.

Michele Johnson and Lorraine Kennedy are partners at Stellar Support Associates, a bookkeeping, CFO services and business consulting company in Westport, Conn. They have written a book, “Building a Stellar Business: A Structured Guide to Financial Success.”

Related: They're robbing you blind

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