Fraud happens in all types of business settings worldwide. There is no such thing as being immune to fraud, more so for fraud that occurs within your organization. In fact, the standing number for lost revenue to occupational fraud is at around 5%. All you can do to address that is to try to minimize the occurrence of fraud to mitigate your losses. To help you with that, here are 6 of the best fraud prevention strategies for your business:
Get to Know Your Employees
Background checks aside, there are certainly ways to screen potential fraudsters and prevent them from being hired but the truth is, every employee carries a risk for committing fraud if one is cornered into doing it. People make purchases they can’t afford, or sometimes get into very destructive hobbies such as gambling and/or drugs. This means that even the most loyal and honest person may be tempted to do something he or she won’t normally do.
Knowing your employees pays off big-time for determining fraud risk. Often, a sudden change in attitude can clue you in to this. Is the employee normally very efficient at work but is now coming in tardy on most days? Are there internal issues such as someone being jealous because of a promotion or a raise? Revenge is a common fraud motivator. Listening to your employees and understanding their needs will not only help you determine who’s at most risk to commit fraud but also allows you to take action to prevent fraud from happening. By knowing your employees, you can turn a fraud risk around to be beneficial to you and your business.
Track Vacation Balances
One of the tell-tale signs of someone trying to cover up fraud is that individual making sure that no one else gets to take a glimpse at what they are doing. Employees who have not taken a leave in years could be a sign that they are hiding something (as much as we’d like to think that they are simply very loyal and dedicated to their work). One way to address this is to rotate responsibilities within your organization. This way, no one has complete monopoly of a process or activity, more so for tasks that involves finances.
Implement a Fraud Awareness Program and Reporting System
Making sure that your employees knows the tell-tale signs of fraud and the consequences of being caught (plus the consequences of loss for the company) will help deter them committing it. Understand that as much as your employees are a liability for fraud, they are also your biggest asset against it. Work with your employees to combat fraud by introducing an anonymous reporting system. This type of whistleblower program allows for an earlier fraud detection and thereby preventing more loss for you.
Have Internal Controls
There are so many ways that you can implement internal controls to ensure that your records are kept clean, safeguard your organization’s assets, and to prevent theft and fraud. Segregating duties and proper documentation are just two examples. Keep in mind that internal audit processes should be monitored and consistently revised to ensure that it remains current and effective. Oftentimes, hiring professionals that are experienced in this area is the best way to go.
Create a Positive Corporate Culture
Employees who love what they do and enjoy their time in your organization are less likely to try to commit fraud. Aside from listening to them, another way of making them happy is to be fair and clear as an employer. Start with a clean organizational structure that gives employees a clear message of who is in-charge of what. This allows for more open and efficient communication within the company. As part of the management, it is also your duty to lead by example and to make sure that everyone, regardless of position will be held liable for their actions.
Get Expert Help
Establishing your organization’s anti-fraud procedures and policies will need the help of experts. Hiring professionals for anti-fraud services such as fraud risk consultation, private investigation and background checks, and helping you complete your internal control audits will save you a lot of time and money in the long run.