10 Simple Ways Helps To Prevent Employee Theft and Fraud
Business owners concerned as employee misdeeds can be of many forms:
- • Larceny (outright theft)
- • Skimming (diverting business funds)
- • Fraudulent disbursements (billing schemes, inflated expense reports, check tampering)
- • Embezzlement of raw materials or inventory
- • Stealing business opportunities (misappropriation of customer lists or other trade secrets).
Companies ensuring small businesses against fraud and alarmed to encourage owners become even more vigilant.
Employees before starting to steal typically have worked at a business for several years and continue for an average of three years before they get caught. That’s a lot of time to generate losses for the business.
Some of the things that you can do:
1. Know your employees:
Be alert to key indicators of potential theft
- • Sudden, apparent devotion to work and working late.
- • Lifestyles well above salary levels.
- • Strong objections related to financial, inventory or supply matters.
- • Drugs and alcohol abuse.
- • Moonlighting with materials available at the business.
- • Evidence of compulsive gambling, persistent borrowing or bad check writing.
Small business owners need to perform background checks on potential hires. One of the important steps is to check for references for employees entrusted with handling your money or financial records.
2. Supervise employees closely:
Not surprisingly, when supervision lax, theft and fraud rates go up and it doesn’t mean you need to check over their shoulder every minute. It doesn’t mean to check what they do and it is always better to have more than one person looking out for your money.
3. Use purchase orders:
Payment, receipt and purchase orders should be separated and handled by different individuals. Purchase orders with pre numbers serially and verifying incoming orders.
4. Control cash receipts:
Pre-numbered sales slips and weekly audits and balancing of sales slips and register receipts should be done with another sales clerk.
5. Use informal audits:
Internal audits without making announcements and having yearly audit performed by external firm.
6. Install computer security measures:
Understanding your computer’s software and how they might be used to divert either money or inventory. Make restrictions to your computer terminals and records. Change your entry codes on a periodic basis and check regularly to ensure that security procedures are in effect.
7. Track your business checks:
Use pre-numbered checks, with amounts and payees typed or written in permanent ink. Using financial software’s such as QuickBooks is highly recommended. Lock blank checks, signature machine in a secured place.
8. Manage inventory and use security systems:
Categorize receiving, store keeping and shipping functions separately. Physically entries need to be annually by individuals who are not responsible for inventory records. Security devices to monitor merchandise or inventory can also be installed.
9. Beware of accounts receivable:
Make mail openings and posting as separate functions. Checks and cash need to be recorded in appropriate registers and stamp checks for deposit only.
10. Provide a way for employees to report theft or fraud by co-workers:
It has to be done carefully and avoid signaling you don’t trust your employees. If you suspect a problem,
- • Be careful while making accusations and conducting
- • Verify suspicions by investigation, and determine the extent of fraud and methods used
- • If it is a large or complex issue, consider involving legal counsel