Business owners frequently grapple with the unsettling reality of fraud and theft, predominantly
instigated by their employees. This risk has significantly escalated with the rapid advancement of technology and the dynamic nature of the global marketplace. According to extensive research,
organizations typically incur an alarming average loss of 5% due to fraud each year, with internal employees accounting for a staggering 85% of serious fraud cases. Given these troubling statistics, it becomes
imperative for organizations to devise and implement comprehensive, multi-layered fraud prevention strategies. Below, we outline effective plans and policies designed to combat fraud and
employee theft within your business.
Cultivating a Strong Corporate Culture
A
well-defined corporate culture serves as the backbone of an organization, outlining the
procedures and policies that dictate employee conduct. Establishing a transparent organizational structure that specifies reporting systems, clarifies the roles of accountable individuals, delineates the segregation of duties, and defines
job responsibilities and regulations is essential. Additionally, employing the right individuals is crucial; thorough background checks on applicants’ past employment and educational history can help ensure that trustworthy candidates are onboarded.
Creating an Anti-Fraud Policy
An effective anti-fraud policy is not just a document but a foundational element that
articulates the definitions of fraud and outlines its prevention and detection procedures. This policy should be clearly communicated to all employees, emphasizing a
zero-tolerance approach towards any form of deceit. Employees must also understand the steps they should take if they suspect fraudulent
activities within the organization.
Safeguarding Physical Assets from Theft
Implementing random and surprise audits
Alongside scheduled annual and quarterly audits, introducing unannounced audits can significantly reduce the likelihood of employee theft and fraud. The
unpredictability of these audits serves as a powerful deterrent, encouraging employees to adhere to ethical conduct.
Segregating duties for inventory management
Segregating the responsibilities of inventory
management staff is vital to fortifying against potential fraud. By ensuring that one individual issues purchase orders while a different person receives the stock, you create a system of checks and balances that minimizes opportunities for deceit.
Installing security cameras
The strategic placement of CCTV cameras in inventory storage areas can play a critical role in monitoring
employee behavior and deterring theft. The mere presence of surveillance can discourage wrongdoing.
Restricting access to inventory areas
Limiting access to inventory storage areas to authorized personnel secures valuable assets and promotes accountability. These areas should be securely locked after hours, with keys
distributed solely to designated individuals.
Combating Check Tampering
Securing blank checks
Blank checks should always be secured and locked away until they are needed for
bookkeeping purposes. This precaution helps prevent unauthorized use.
Regularly reviewing bank statements
Monthly reviews of bank statements represent a
proactive strategy to identify potential fraud, especially concerning tampered checks. Anomalies in transaction records can often reveal foul play.
Preventing Expense Reimbursement Schemes
Mandating receipts for expense claims
Employees should be required to submit legitimate receipts for any expenses they wish to claim for reimbursement. This practice ensures
accountability and traceability.
Establishing a clear expense reimbursement policy
A documented policy detailing reimbursable expenses is essential. This policy should clearly outline covered expenses, and each
employee must receive a copy to ensure understanding.
Conducting comparisons of expense reports
To enhance oversight, designate different employees to
review and compare expense reports submitted by their peers. This collaborative approach helps confirm the legitimacy of claimed expenses.
Preventing Billing Schemes
Maintaining an approved vendor list
Developing a list of approved vendors is critical in shielding the organization from fraudulent billing. Conduct thorough research to verify the legitimacy of each vendor to avoid inadvertently
engaging with fraudulent companies.
Establishing a price list for vendors
Vendors should provide a list of approved prices for their goods or services. This measure helps protect the
organization from overpayment and ensures fair pricing.
Requiring signed receipts for transactions
To facilitate transparency, checks should only be signed when accompanied by a signed receipt for the corresponding product. This practice encourages
accountability and thorough record-keeping.
Protecting Cash from Theft
Requiring management approval for sensitive transactions
All sensitive financial transactions should be
conducted only with explicit approval from a manager. This oversight helps safeguard against unauthorized access to funds.
Receiving monthly account statements
Frequent updates and reviews of customer accounts allow for the timely detection of discrepancies or fraudulent
activities within the cash flow.
Implementing duty rotation practices
Regularly rotating employee duties and encouraging annual leave can deter theft. These actions create an environment where employees are less likely to
engage in dishonest behavior due to the increased risk of detection.
Utilizing bank lockers for cash management
Reduce employee access to cash handling to further
mitigate the risk of cash theft. Payments should be directed into the company’s bank account, minimizing employees’ physical handling of cash.
Conducting surprise cash audits
Regular, unannounced counts of cash against receipts can quickly uncover discrepancies and
illuminate any potential theft.
Installing video surveillance in cash areas
Video cameras located in sensitive cash handling
areas can serve as both a deterrent and a monitoring tool, helping to prevent theft.
Conclusion
Establishing robust fraud prevention measures is vital for your business’s security and integrity. By
implementing and adhering to the plans and policies outlined above, you can create a vigilant environment that significantly reduces the risk of employee theft and fosters a culture of honesty and accountability.
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