How To Prevent Fraud & Employee Theft In Your Business – Policies & Plans

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Many organizations and individual business owners face fraud and theft each year due to their employees. The risk of fraud has increased due to the advancement of technology and progressive development of the world into a global village. According to 2014 research reports by global nation, organizations face 5 % loss due to fraud each year, in which 85 % of serious fraud cases were committed by internal employees. Organizations should develop multi-layered fraud prevention strategies while keeping these statistics in view. Practice the following plans and policies to prevent fraud and employee theft in your business.

Practice corporate culture

Corporate culture defines procedures and policies which govern employees. The organizational structure of reporting systems, the accountable person, their segregation of duties, job responsibilities and limitations should be clearly defined. Hire the right employees by investigating their past employment history and educational background.

Establish an anti-fraud policy

A documented policy which defines fraud, its prevention, and detection policies should be implemented after proper training of all employees. A zero tolerance policy of all kinds of fraud should be communicated to employees. They should also be aware of actions which would be taken in case of fraud.

How to Prevent Theft of Physical Assets:

Random and surprise audit system

Along with an annual and quarterly audit of assets, a system for uninformed audits should also be developed. Under pressure of unexpected audits, employee avoids stealing and fraud.

Segregation of duties

Duties of inventory management staff should be clearly segregated to prevent fraud. Purchase order issuance and receiving of stocks should be done by two different individuals.

Security cameras

In inventory storage areas, CCTV cameras should be installed to prevent employee theft.

Limited access to inventory storage areas

Only authorized personnel should be allowed to enter areas in which inventory is kept and these areas should be kept locked in off hours. Keys should be issued to specified individuals only.

How to  Prevent Check Tampering:

Security of blank checks

Blank checks should not be accessible to anyone and should be locked until required for bookkeeping.

Check bank statements of  business

A review of monthly bank statements helps in detecting fraud in the form of tampered checks.

How to Prevent Expense Reimbursement Schemes:

Receipts of expenses

For reimbursing expenses, demand a receipt of the amounts that the employee is claiming.

Policy for expense reimbursement

A company must have a documented expense reimbursement policy. A clear segregation of reimbursable expenses should be defined in that policy and every employee must receive a copy of the reimbursement policy.

Comparison of expense reports

A comparison of expense reports submitted by different employees should be made to evaluate the legality of expenses.

How  to Prevent a Billing Scheme:

List of approved vendors

To prevent fraud at this level, maintain a list of approved vendors and do research to ensure the legality of the vendors. If you don’t practice this simple plan, then you may be paying fake companies.

List of approved price

An approved price list should also be maintained to avoid payment at higher rates.

Signed receipts

Sign a check only if a signed receiving of the product is attached.

How to Prevent Theft of Cash:

Manager’s approval

Sensitive transactions should always be accomplished after approval of a manager only.

Monthly account statements

Regular updates of customer accounts prevents fraud at this level.

Rotation of duties

Rotation of duties and sending employees on annual leaves and vacation prevents employee theft because the employee has the terror of easy detection by others.

Bank lockers

Cash and payment handling by employees should be minimized to prevent cash theft. Payments should be received directly in a bank account of the company.

Surprise audit of cash

Discrepancies in cash can be detected easily by counting the cash and comparing it with receipts.

Video cameras

Install video cameras in sensitive areas where cash is handled to prevent stealing.


Fraud prevention is critical to secure your business. Following the above plans and policies in an organized manner will prevent employee theft.

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