How to prevent employee fraud
No business owner expects employee fraud to happen in their business. But it’s a significant problem faced by businesses of all types, sizes, locations and industries.
There are three different types of fraud:
- Asset misappropriation fraud is where an employee steals or exploits your business resources. This can include: stealing cash before or after it’s been recorded, making a fictitious expense reimbursement claim and/or stealing non-cash assets.
- Financial statement fraud involves omitting information from the business financial reports. This can be in the form of fictitious revenues, hidden liabilities or inflated assets.
- Corruption fraud happen when employees use their influence in business transactions for their own benefit while violating their duty to the employer. For example, bribery, extortion and conflict of interest.
Business owners should take proactive measures to reduce the risk of fraud and corruption ever happening in the first place.
If suspicions are raised about an employee committing fraud, it’s better to be proactive early on.
Some key prevention strategies include:
Fostering a positive work environment where employees feel valued and are made to feel good about coming to work.
Creating a positive work environment can be done in several ways, including providing routine training sessions to improve the individual as well as the collective. It can also include things like rewarding great behaviour like teamwork, innovation and collaboration.
If staff are made to feel valued and encouraged to be part of the team, then there’s less chance that the individual would want to hurt the team for individual gain.
Creating a code of conduct and having a policy manual where control procedures are documented and employees are trained on them.
Having formalised processes and procedures for your business can save you and your team time and money by increasing efficiency. Having a set way of doing things can also help highlight when things aren’t being don ‘by the book’ – making behaviours which lead to fraud easier to spot.
Implementing accounting controls and conducting regular inventory checks, audits, reconciling cash daily, and personally reviewing financial statements. If you notice suspicious amounts starting to leave the company, then you know something’s up.
You can check on all your numbers using accounting software such as MYOB – and the best part is that you can do it from anywhere.
To prevent future fraud from occurring, consider the above strategies and look at hiring a fraud examiner who can implement the internal controls needed for your business.