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Fraud Forecast to Rise as Times Get Tough

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As though they didn’t have enough to worry about, it seems that during the current economic crisis business owners have also need to be worrying about the enemy within: fraud, where employees steal from their bosses.

It shouldn’t be all that surprising: when people are nervous and worry that their next payslip may be their last, they’re more likely to be seduced by the easy pickings their employer poses. Small businesses are most at risk, as they are unlikely to have measures and guidelines as strict as larger corporations.

Fraud can take on many forms, from employees overestimating their monthly petrol expenses to systematic embezzlement of funds over a period of years. The fact remains, however, that all fraud is bad for business, and some forms can bring a company to its knees. Proprietors would be well advised to take steps to minimise it, no matter how small their company or basic its operations.

The first step is obviously to recruit those who are less likely to commit fraud. Reference letters can only do so much; it is far better to have an informal chat with a employee’s former managers to get a true picture of their personality. There are also companies who may be able to offer a more thorough background check, but whether this would be appropriate depends on the seniority of the recruit. You don’t need to know the life story of each and every employee, after all.

Fraud cannot occur if employees don’t have access to the information, so it important to implement policies that limit who can access what, and when. Don’t allow an information free-for-all simply because it’s easier than deciding which employees should be trusted, especially in this era of thumb drives and easy mobile networks; sensitive data could be out of the door before you notice it has been accessed. If somebody doesn’t need certain information, don’t give it to them.

If accounting is delegated to employees, another tactic could be to separate responsibilities, so that no one person has access to the entire system. For instance, the sales department should not have any access to the purchase ledger, while accounts payable should have nothing to do with the petty cash float. If feedback is built into your accounting processes, any suspect transactions are more likely to be noticed, and the scale of any fraud will be limited.

Of course, one of the things that makes it possible to detect fraud is a paper trail. Even if you are aiming for a paperless office, there is nothing to stop you from implementing procedures for electronic document management (EDM) and incorporate it into your standard operations. After all, you already need to keep certain documents for audit purposes anyway, so it should not be too much extra work. And having quick and easy access to financial documents means that it will be easier to track any financial shenanigans.

Of course, none of these is an absolute guarantee that a business will not fall a victim to fraud, but they can help by making fraud less likely to occur, and easier to detect. By putting measures in place that make conducting fraudulent activities as difficult as possible, business owners could save themselves from a world of hurt in the future.

[Image by J Cornelius]

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