What Is Forensic Accounting?

Forensic accounting. Other than sounding like it belongs on the set of a Law and Order episode, the term can sound a bit intimidating. Maybe something that only huge multi-national corporations would need, or even be able to afford. But the truth is that forensic accounting can be hugely beneficial to businesses of all shapes and sizes, should the worst happen. Knowing what it is and why you might need it is the first step to ensuring the health of your business, and helps you to create an action plan if you discover theft within your business. So to try and make sure you’re fully prepared, we’re going to talk a little about forensic accounting, what it’s used for, and when it might be necessary for you.

What Is Forensic Accounting?

Forensic accounting can be described as an attempt to piece together or reconstruct a past event or events using financial information. It’s usually done by someone who has been trained not only as an accountant, but as an investigator, since forensic accounting is most commonly used to work out if a crime has taken place in your business, and to reconstruct exactly what happened.

So forensic accountants are both financial experts and a professional investigators, who are trained to look behind the figures, and not only look for what the figures tell them, but also what is missing. It’s a key tool for detecting fraud and embezzlement within the business, and is also a great way of understanding the position of your clients.

The process itself is divided up into three distinct categories – the litigation support (where the accountant gathers information to help with bringing a case against a business), the investigation of the documents themselves, and then the potential resolution of the dispute which prompted the research in the first place. At every stage, the forensic account analyst is there to provide impartial evidence and support for their client.

Why Would You Want It?

Forensic accounting is one of those services that might not seem that useful, but in actual fact businesses can benefit from it in a lot of ways. For example, identifying theft of deception quickly is essential to ensure you find the culprit and put a stop to it before your losses are too large. It can rescue the financial health and reputation of your business if you act in a swift manner against these things – especially in a smaller business, where a chunk of money going missing can make a big difference. And then , you need to consider the fact that if someone does something once, they’re more likely to do it again if they feel that they can get away with it. The very act of investigating the discrepancies will often scare these people away from committing further offences, and help to keep people aware that there are consequences for their actions.

It is also the perfect tool if you ever find yourself in a dispute that ends up in court. Forensic accounting is built around the idea that you will go to court in the end, and so the emphasis on finding and compiling evidence in a compelling way is pretty strong. The financial accountant who located the evidence to substantiate the claims would be required in many instances to testify in court, as well as an independent analyst who can confirm the findings. This means that if a company has to take an employee or client to court in order to settle the dispute, they will have the backing of an independent source, which can be very reassuring to a lot of people.

At Debtcol, we have specialist who have spent years in the field of accounting, making them perfectly placed to help you understand your customers financials, putting you in a better position to choose credit terms and collect on payment. Our experts are trained in forensic analysis, financial accounting and private investigations, helping you get to the truth of an issue before you go to court. We are dedicated to providing impartial advice and support, whenever you need it. For more information, just get in touch with us today.