In many small businesses, particularly those in the early stages of growth, it's common for a single person to handle all aspects of financial management. That person may process payments, manage payroll, reconcile bank statements, and maintain the books. It’s efficient, cost-effective, and often built on trust. That concentration of responsibility—while convenient—also creates risk.

 

Even the most honest and well-meaning employee can make mistakes. And unfortunately, the same access and authority that allows someone to keep things running smoothly also creates the opportunity for financial mismanagement or fraud. Without proper oversight or internal controls in place, small businesses are left vulnerable.

 

The good news? You don’t need a large accounting team or expensive software to implement effective internal controls. With a few thoughtful adjustments, small businesses can better protect themselves, deter wrongdoing, and reinforce accountability.

 

1. Introduce Separation of Duties—Even on a Small Scale

 

In a perfect world, financial responsibilities would be divided among several people. One person would enter transactions, another would approve them, and a third would reconcile the books. But in a small operation, that’s not always possible.

 

What is possible is introducing checks and balances. If your bookkeeper writes checks, someone else—ideally the business owner or a manager—should be reviewing and approving bank statements each month. If one person handles customer payments, another should verify that the deposits match the records. Even a simple second review can significantly reduce the risk of error or misuse.

 

2. Control Access—and Control the Narrative

 

QuickBooks Online is widely used by small businesses for its convenience and flexibility, but it has limitations when it comes to finely-tuned user access. While you can assign roles, the real issue is that a single person with full administrative access can often do more than they should—without much oversight.

 

At minimum, the owner should receive and open the monthly bank statements—either via mail or secure download—before they’re reconciled. This allows for an unfiltered look at account activity before the books are adjusted. Reviewing the statement side-by-side with the reconciliation report gives you a clear view of what cleared the bank versus what’s sitting in your accounting software.

 

Requesting or downloading copies of cleared checks is another useful step. It lets you verify who the check was made out to and who signed it, which is key in catching unauthorized payments or altered documents.

 

And while dual authorization for transactions is ideal, many small businesses can’t support that in practice. In that case, a routine of independent review by the owner becomes the control. It may feel like an extra step, but it’s one of the most powerful deterrents to fraud—and one of the few that costs you nothing but a few minutes of attention each month.

 

3. Protect Payments with Clear Limits and Bank Tools

 

Limit company credit card access to essential staff, set spending caps, and review statements closely. Checks should only be issued with documentation, and blank checks should be secured and tracked by number.

 

To prevent fraud, many banks offer Positive Pay, where you submit a list of approved checks. If a check doesn’t match, the bank flags it before payment. For electronic payments, ACH blocks and filters allow you to pre-authorize vendors or transaction types, stopping unauthorized transfers before they clear.

 

These tools add strong safeguards without complicating daily operations—and they’re often just a phone call away.

 

4. Monitor Payroll Closely

 

Payroll is one of the most common areas where fraud occurs—especially when one person has complete control. Regular payroll audits should compare the payroll register with employee timesheets or work logs. If your payroll provider allows it, enable alerts for new payees or changes to direct deposit accounts. Take note of any unusual patterns, such as employees being paid identical hours every pay period or overtime that doesn’t align with known workloads. If possible, have someone other than the payroll processor review payroll reports before they are finalized.

 

5. Require Employees to Take Time Off

 

While it may be challenging when staffing is limited, requiring employees with financial responsibilities to take regular vacations can help expose potential problems. Fraud schemes often depend on consistent, uninterrupted access to records. When someone else temporarily steps in, irregularities are more likely to surface. Even a one-week absence can be enough to uncover issues—or simply reaffirm that your systems are working well.

 

6. Use Technology to Automate Oversight

 

Most modern accounting and banking platforms include features designed to enhance transparency. These include:

• Audit trails that track changes to financial records
• Alerts for large or unusual transactions
• Limited-access user roles (e.g., “view only” or “payroll only”)

 

Even simple tools—like automated monthly financial reports emailed directly to the owner—can provide valuable insight without adding administrative burden.

 

7. Foster a Culture of Accountability

 

Internal controls work best when they’re part of your business culture—not just checkboxes on a to-do list. Make it clear that financial oversight is a priority, not because of mistrust, but because it’s good business.

 

Encourage employees to speak up if something doesn’t look right. Offer training on procedures and explain why certain reviews or policies are in place. Accountability isn’t about suspicion—it’s about protecting the health of the business for everyone involved.

 

No business is immune to risk, and the smallest companies often have the most to lose. But with a few deliberate changes, you can create an environment where mistakes are caught early, transparency is valued, and the opportunity for fraud is significantly reduced.

Strong internal controls don’t just protect your finances—they reinforce the integrity of your entire operation.

 

If you're unsure where to start, consider reaching out to an outside accountant or advisor who can help assess your current processes and identify practical solutions that fit your size and budget. Protecting what you’ve built doesn’t have to be complex. It just needs to be intentional.