Employee Fraud and how to cope!

If you ever worry about the risk of being defrauded, here's

a number to take your breath away: almost a trillion dollars per year.



That's how much businesses lose to occupational fraud –

inside jobs, usually by employees. Shocking, isn't it? It

represents about 7% of total company revenues.



The numbers come from the experts – the Association of

Certified Fraud Examiners (ACFE) – in their latest annual report.



Not surprisingly, the firms that lose the most are the ones

that have taken the least action to try to prevent employee fraud.

And the crime is disproportionately worse in small and medium

sized businesses, which are the most vulnerable.



You won’t be surprised to know that most employee fraud originates

in the accounting department, but it's distressing to learn that second

place goes to executives and management, followed by

operations and sales departments.



And although you can actually insure against loss through

fraud, I'm sure you'd agree that taking some smart and simple

steps to prevent the crime is your best starting point – and the

best way of keeping any insurance premium as low as possible!



Nothing's fool-proof but I've compiled this list of a dozen things

you can start to do right now to virtually eliminate the risk of

employee fraud – or to quickly expose the culprits:



1. Build your company culture on integrity. Be a role model of honesty yourself.

2. Be seen to deal quickly and firmly with any employee misconduct whatsoever.

3. Don’t allow one employee to be responsible for both billing and handling payments.

4. Insist that all checks above a fairly low amount have two signatures.

5. Never sign blank checks, or checks for new suppliers without verifying them.

6. Tell your bank not to permit transfers between accounts without your say-so.

7. Carefully screen all new employees, taking up references and monitoring them.

8. Keep an eye on disgruntled employees or those who seem to be living above their means.

9. Regularly check financial statements yourself – take a course if you're not up to scratch.

10. Conduct surprise audits – with no warnings, or when your bookkeeper is on vacation.

11. Use sequential numbering on checks, purchase orders, invoices, so it's easy to spot gaps.

12. Run a test by submitting a money order or check as an unspecified payment.



It's important to let your employees know of these policies –

especially items 2 and 12 – since that's the easiest way to

discourage fraud in the first place.



You might also want to implement – and tell everyone about it –

an anonymous "whistleblower" policy that enables suspicious

employees to report their concerns to you.



With a little bit of forethought, you can slash the likelihood of

fraud in your business – even the ACFE figures show that.

If you're not already doing it, there's no time like the present

to tackle my Top 12 list!