8 Tips to Prevent Fraud and Employee Theft

Wednesday, July 10, 2019

Fraud and theft in the workplace can be costly to a business and much more damaging in the long term, ruining morale and reputation alike.

Article 3 Minutes
8 Tips to Prevent Fraud and Employee Theft

The Association of Certified Fraud Examiners (ACFE) reports that it takes an average of 18 months to catch an employee criminal. During this period, the employee is likely to have done extensive damage, some of which cannot be recovered.  According to Hiscox, employee theft costs American businesses $50 billion every year. Although there is no sure fire way of preventing employee theft, companies can implement specific strategies to reduce the frequency and cost.

1. Define what theft means to your company

What do you deem as theft in your company? Many employees have the habit of taking petty cash and office supplies as they feel they can get away with such minor offences. And, most employers don’t pursue such small crimes. While the habit may only have minor effects, in the long run, an organization can suffer vast losses. Define what fraud means to your company and develop an anti-theft policy.

2. Communicate the anti-theft policy clearly

The next step is to make them aware that you’re watching for this kind of behavior. During an employee’s onboarding process, you should make it a norm to communicate the firm’s anti-theft policy. Make them aware that you’re keen to address the issue and demonstrate what the penalties are.

3. Assign two to a task and segregate duties

Depending on the nature of the role, you can either separate functions or assign two people to a task. When the task involves cash or expensive goods, assign two employees to do the job. For instance, you can schedule two workers to re-stock products at night.

Other times, dividing work roles can prevent embezzlement. For instance, in bookkeeping, ensure the person who handles the money has a receipt that’s signed by another employee. You can implement similar controls in petty cash management and tool supplies.

4. Train supervisors

Train your managers and supervisors on the different types of theft and guide them in understanding how they can help to monitor employee behavior. Ensure they know how to ask questions in a non-accusatory tone to avoid disputes between senior and junior employees.

5. Prevent corporate credit card fraud

If your company offers expense accounts or corporate credit cards, there’s a high possibility that unethical spending will happen. 33% of corporate credit card holders admit that they defraud the companies they work for, and most employees use the card for risky purchases and personal expenses that aren’t related to the firm’s core business.

Here’s how to prevent corporate credit card fraud:

  • Keep your card secure by protecting the physical card itself
  • Change passwords often and make them unique
  • Check your statements regularly for fraudulent charges
  • Limit your company credit cards

6. Conduct physical audits

This involves counting inventory or cash to confirm that everything that reads in your system is physically available. You should avoid having a lot of loose cash lying around the office. Make sure you include supplies and appliances in the inventory because these, too, are valuable.

7. Carry out periodic reconciliations

You should reconcile your accounts regularly. Once a month is good enough but more often is also better. Confirm that deposits, balances and withdrawals are in agreement. Make it a habit of requesting bank statements so that you can detect irregularities early enough.

8. Standardize your documentation

It’s easier for someone to pass off a false document if all your documents have different formats. It’s also harder for you to review your records efficiently if the forms are not standardized.

Steven Sanders

Steven Sanders is a freelance writer, financial advisor, digital nomad (currently based in China) and long-time biohacker. He enjoys spending time hiking and camping in the woods. Steven works as an independent consultant for Cardzgroup.com


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