6 Tips to Fight Employee Fraud From Fox Business

One of the recurring problems faced by small business is employee fraud.

We’ve reported that companies lose $2.9 trillion per year to fraud committed by their own employees. About 30 percent of those companies are small businesses; the net median loss to U.S. forms is about $150,000.

The Fox Small Business Center followed up with an overview of how employers can work to fight employee fraud (which cites check tampering and faked reimbursement submissions as the most common types of employee fraud).

Among the key tips:

  1. “Segregate accounting duties to the greatest extent possible.” A fraud examiner told Fox. “No one person should be responsible for an entire accounting cycle, meaning no one person should be allowed to approve vendor invoices, prepare checks to go back to that same vendor, sign the checks, post the checks to the general ledger and reconcile the bank account.”
  2. Apply a system of checks and balances to your inventory. “If you are a business that includes inventory, make sure your shipping and receiving departments are separate departments handled by separate employees,” another expert advised.
  3. Create forward-thinking HR policies and workplace standards of practice. “We are big believers in mixing things up and adding a different flavor to policies and procedures,” said Greg Jones, CEO of BookKeeping Express, who went on to recommend “instituting new short-term policies like not only requiring receipts but requiring that clients sign-off on meal and entertainment-related expenses.”
  4. Work harder to make sure your workplace culture is one of honesty and values. How ca you best do this? By setting an example — “An owner who goes out for steak and three bottles of wine is implicitly creating a culture where this sort of behavior is perceived to be normal,” another expert said.
  5. Monitor employee behavior. “If you notice sudden changes of your long-term employees, such as financial habits, like extreme spending, gambling, borrowing from co-workers, devotion or lack of devotion to work, there may be reason for concern.”
  6. Set up hotlines for employees and external sources to provide tips on suspicious activity. These should be anonymous, and it should be made clear that those who place tips can do so “without fear of reprisal.”

The best way to combat employee fraud is to work to create the healthiest, most honest employee culture you can.
Originally published: Dec 20, 2011

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