Find a lawyer to help you answer your legal questions.

  • My Legal Briefcase

    Small Money Mistakes That can Get You into Big Financial Troubles
    Posted: 2012-06-28 05:00:16


    Are you in a position to manage the finances of your company or someone else’s business? Do you get to write or sign cheques? Pay somebody a salary? Pay your suppliers and collect money owed from your customers?

    These tasks sound pretty straight forward, and many times, we simply take them for granted. But history has shown that they can be the source of many transactional disputes that can take you to court. They often occur because someone overlooked simple things such as making typos or other mistakes. The best way to avoid these is through good diligence.

    Here are 5 potential instances where costly mistakes can happen:

    1] Signing a cheque incorrectly: A cheque is a legal document and, in order to be valid, it has to be filled and signed correctly. One common mistake that people make is negligently writing a cheque in a way that makes altering easy. This often occurs when someone writes the cash amount to be transferred and leaves enough space to fit additional digits. If such cheque is stolen before it is deposited, the thief can easily alter the cheque (by adding additional digits) and deposit the altered amount in his/her bank. Once this happens, the person drawing the cheque cannot always recover it, especially if the cheque was signed negligently.

    2] Not checking monthly bank statements: Unfortunately, many hackers of this world are attracted to the prospect of hacking into innocent customers’ banking accounts and making frequent small-value transfers so that customers don’t notice their money is being depleted. Quite often, innocent victims include small businesses that do not have sophisticated account security. What these customers don’t realize is that Bank Account contracts may hold them responsible for any loss caused by theft if customers don’t check monthly statements and actively ensure that their money is safe. In Canada, courts have held that such contracts are valid and enforceable. Therefore, customers who have fallen victims to online fraud cannot easily argue that they didn’t know about this contract or that they didn’t have time to check their monthly statements.

    3] Allowing the same person to issue and sign cheques: One very common and costly mistake that small business owners make is allowing the same person to issue and sign cheques and other money transfers. Why? Because such people have full access and control of their companies’ accounts. They can easily write a fraudulent cheque to a non-existing supplier, sign it and deposit it in their own bank accounts. There have been many cases before courts dealing with this issue, where the business owners sometimes were left without a chance to recover their lost assets. To prevent this issue from arising, a good practice is to ensure that one person is responsible for issuing transfers/cheques and a different person is responsible for signing and approving them.

    4] Not following bank’s procedures when requesting wire transfers: When you want to make a wire transfer from your account to another, the process sounds very straightforward. All you have to do is tell the bank where you want to send your money. Unfortunately, these instances are fraught with small mistakes. For example, you may spell the account holder’s name wrong or the bank teller may type a wrong digit in the account number. When wire transfers are made for large amounts of money and reputation is at stake, small typos can lead to big trouble.

    5] Not keeping bank cards in a safe place: As a small business, you may hold a debit card to access your company’s bank account. This card, by all means, has to remain safe and secure. Many banking agreements hold the card holder responsible for losses and card theft. If the card is lost and money is stolen, it may not be easy to recover the amount from the bank.

    Disclaimer: Content on this website is provided for informational purposes only and does not constitute a legal advice.