Employee Fraud & Embezzlement

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The current economic downturn has created an environment ripe for employee fraud from your small business. While these thefts occur in several different ways depending on the nature of your business, there are steps that you can take to protect your company and engage in smart business practices.


HOW CAN SMALL BUSINESSES PROTECT THEMSELVES?

Hiring: Begin protecting your business by hiring competent, trustworthy individuals with a track record of success in the workplace. Run background checks and research employee history.

Internal checks and balances: Spread out the financial tasks of your business to ensure at least two or more employees are responsible for these duties. This will help eliminate the possibility that one employee can embezzle funds.

Audits: Conduct periodic audits, both scheduled and unscheduled, to take stock of your business' fiscal processes. At least once a year, allow external sources to audit your company.

Certified Fraud Analysis: While financial audits may help take stock of your fiscal processes, you might also consider having a certified fraud expert evaluate your business and identify financial processes that might be vulnerable to employee fraud or theft. These analyses evaluate risks and related controls, and your fraud expert can provide recommendations to enhance controls and lower your risk of employee theft.

Anonymous reporting policy: Employees should be provided an anonymous mechanism to report fraud within the company to increase reporting confidence and limit intimidation by coworkers.

Mandatory vacations: Employee fraud and embezzlement is often discovered when the employee who is stealing is forced to allow another employee to fill in and complete his/her duties. Institute a policy that requires all employees to take an annual vacation for a consecutive week.

Drug screening: Unfortunately, employee fraud and substance abuse sometimes go hand in hand. An addiction may push an employee to commit crimes he/she may not normally commit; periodic drug screenings can help identify these problems and create a safer work environment.

Model integrity: Create a work environment that promotes honesty and integrity. Model an attitude of compliance with rules and policy, and expect the same from your employees.