Posts Tagged ‘fraud prevention’

Review Your Bank Statements

Tuesday, October 7th, 2014

review bank statementsIt is important for the partners of a law firm to personally review their trust account and operating account bank statements each month. Ideally, the statements should be mailed to the managing partner and be opened by the partner, not a member of the staff. The partner should then examine the statements for anything that looks out of place and should spot check a portion of the payments flowing out of the account for proper documentation. It should be made known amongst the staff that the statements are being carefully reviewed and will be questioned from time to time as a preventive measure against potential fraud.

Also, if the firm has access to any lines of credit or has its own credit card, those monthly statements should also be personally reviewed by the managing partner. This is a critical issue. Over the years, we have seen several instances of fraud at firms involving seasoned, trusted personal friends employed by the firm. I am talking about personal friends of the partners, people they might have gone to church with, embezzling money over time to the tune of hundreds of thousands of dollars –over a million dollars in a few cases we’ve seen.

If you have adequate staffing, put checks and balances in place so that the same people who are writing checks for the firm are not the ones signing them. Also, put in place a system where whoever is writing the checks for the firm is not the person who opens the bank statement and reconciles the account at the end of the month.

Sadly, it is often the person on your team that you trust the most that ends up surprising you with fraudulent activity. Better to create a situation whereby it is as difficult as possible for someone to perpetrate such acts. Everyone wins when fraud is prevented.

You can learn more about this and other law firm finance topics in my book, How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms.


The above material is excerpted from How David Beats Goliath – Access to Capital for Contingent-Fee Law Firms and is subject to copyright protection © by Michael J. Swanson, all rights reserved

Photo Credit: Philippe Put (via Flickr)
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