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Fraud Prevention

Five Simple Ways to Help Stop Employee Theft

Oct 8, 2008 Jennifer Shook

Fraud is becoming more and more common, and it is important to protect your business from threats of fraud. Here are five simple ways to stay safe from fraud.

As white-collar crime is becoming more and more common in today's workplace, there are some simple steps that business owners can take to protect themselves from becoming a victim of fraud and employee theft. Whether you are the owner of a small business or corporation, have 5 employees or 500, protecting yourself against fraud is not only the wise thing to do, but necessary in today's society. Here are five simple and cost-effective ways for all business owners to minimize their risk of fraud in the workplace.

1. Perform a Background Check

First and foremost, perform a background check on all employees. The vast majority of employees that commit fraud have a previous criminal record. Do your homework before hiring a new employee; check references, talk to previous employers, and research their criminal history. Many states provide background check services online for no cost, but if this service cannot be found for free in your state, it is worth the money spent. There is no excuse for ignoring this simple step that may save you thousands (or millions) of dollars.

2. Find out Where Fraud Could Occur

Secondly, determine your business's weak spots. Analyze all aspects of the business and make a list of possible ways that each position could be compromised. Try to put yourself in the shoes of a person pressured to commit fraud. If this is difficult for you to do objectively, bring in a trusted third party to play devil's advocate. It is important that you understand each position to the best of your ability. If your company is too large to do this, educate managers to do the same. Keep in mind that managers are often in the position to commit the largest frauds.

3. Prevent Employees from Having Control

This fact leads to the third step of prevention: never let one person have too much control. This may be hard to do in small businesses when there are a limited number of employees and an unlimited number of tasks to be completed. Always, always have employees double check each other's work, and segregate duties whenever possible. For example, do not let the same employee write checks and reconcile the bank statement. The more dispensable an employee is, the smaller the chance that they will be able to commit fraud.

4. Promote Whistle Blowing

A fourth step is to set up a system for employees to report fraud. Most cases of fraud are caught not by audits, but by whistle blowing or accidental finds. If employees feel safe from any repercussions, they will be more likely to notify the company of misdeeds. Large companies should consider setting up a hotline for employees to call. Smaller companies should consider a more cost-effective method, such as a suggestions/complaint box.

5. Appreciate Employees to Stop Theft

Finally, appreciate your employees and get to know them as much as possible. It is surprising how many employees commit fraud because they feel that they deserve more than they are earning. Forming a connection with employees will help you understand them better and make them feel like a more important part of the company. Remember that making employees feel valued and increasing employee's salaries are not always the same thing. A simple thank you goes a long way.

The copyright of the article Fraud Prevention in Business Management is owned by Jennifer Shook. Permission to republish Fraud Prevention in print or online must be granted by the author in writing.

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