Understanding Disbursements to Avoid Disbursement Fraud

For most companies, disbursing funds is a daily routine to make sure that operations are in order. Whether the release of funds is for paying for the upkeep of facilities, vendors for events and even suppliers of the raw materials you use for your company’s product manufacturing, disbursing funds from your treasury is routine – no matter how small or big your company is.  

Read: The Role of a Chief Financial Officer in Good Cash Flow Management  

To understand how to disburse your funds properly, however, let’s first go into what disbursement is. 

 
Disbursement of Company Funds 

As disbursements of funds are a daily occurrence for most companies, it is important to understand the mechanics of cash flow management in a very thorough manner and the role that proper accounting and documentation play. 
 
Disbursements are basically your cash outflows or the money coming out of your company. To make sure you keep your cash flow positive, it is important to ensure that your cash inflows are greater than your disbursements. 
 
With this, proper disbursement of company funds lies not in just in being able to release liquid cash whenever it is needed by a department but to make sure that every release is accounted for, documented and with proper receipts and/or proof of purchases as needed.  

 
 
The Importance of Proper Disbursement 

In this modern age, some business owners do hands-on work managing their own cashflow. While this may seem like a practical move, the problem is that this often leads to disbursement fraud, specifically when you are issuing checks for payments. 

 But don’t worry, there are many tips to help you keep away from these kinds of fraud. Here are some of them: 

• Implement a policy where you will be the sole authorized check signer. If you cannot accommodate this responsibility, at least make sure that the check signer is a key executive who is not part of your accounting team.
  

• Do your best to keep away from signature stamps. If you are not careful, these stamps might be used in the wrong way, paving way for disbursement fraud
  

• Put a limit on the amount that can be withdrawn using a single signature. You can try requiring two signatures beyond a certain amount. 
  

• Prior to giving your approval for the signing of a check, you can impose stricter rules such as requiring supporting documents like invoices and purchase orders. This policy can help you ensure that the check you are signing will indeed be used for the specific purpose it was intended for. 
  

• Be careful about signing checks without looking at invoices or credit card statements. Keeping tabs on your financial resources and making sure that it is free from fraud requires thorough scrutiny from your end. This will ensure that you are not paying for items that your business never purchased. 

Cash is a liquid asset. As such, it is very easy to convert to money and very easy to disburse to your employees regardless of need and justification. 

With this, it is your CFO and your treasury’s responsibility to make sure that you remain cautious of managing your cash and disbursements, making sure you do not accidentally commit disbursement fraud in the process.  

Read: What Are the Advantages of Cash Flow Forecasting for your Business?  

Need help with your Company Finances?  

When it comes to accounting, the services provided by an accountant are imperative. You have two options when it comes to this: hire an in-house accountant or outsource a business accounting service. You can check out our blogs if you want to know more about outsourcing your functions to a reliable partner.  

Need help with accounting for your small business? Check out D&V Philippines' suite of finance and accounting services or you can grab a copy of our whitepaper Outsourcing: How to Make it Work to know how we can make outsourcing engagement work for your growing business.   

This post was first published on 09 February 2015 and edited 28 June 2024. Edited by: Aly Tagamolila