7 Actions To Take Now To Prevent Losing 200000 Or More
Nov 02, 2009
Ron Willingham the founder of Integrity Systems advises “don’t be afraid to ask the hard questions.” So I ask you, are your employees stealing from you? How do you know? It never ceases to astound people that a trusted employee could steal from you. It angers you and makes you sad, but it is happening every day. Large amounts are stolen from businesses and the most vulnerable companies are sustaining the biggest losses.
Are you a victim?
Considering the potential losses
7 Steps to Take Right Now
1. Hire the right employees. Conduct background checks for people handling inventory and money. Check past employment, criminal convictions, references, and education and certifications. Also, conduct drug screening since often, according to Gill, employees will steal from a business to support an addiction. Remember, however, to always get the written consent of candidates before doing research since many federal and state laws govern the gathering of such information.
2. Maintain strong internal controls. Have checks and balances in place, suggests Gill. "For example, you don't want a signatory on the bank account balancing the check book," he says. "If I can write checks on the account and I reconcile the bank book, I'm free to manipulate the check register."
3. Make sure expenditures are approved. For every expense, have a manager and someone in accounting approve it. The supervisor will ensure that the expenses are valid, while accounting will run the math.
4. Monitor cash situations. In a retail situation, Gill suggests having security cameras monitor activity at registers and storage areas where inventory is kept. "People are less likely to do it if someone is watching them," he says.
5. Conduct surprise audits. Catching an employee off guard could be your best bet in discovering fraud. "The key is that an employee generally doesn't know what's coming and won't have the time to change the records to hide the fraud," says Gill. "We've seen cases where somebody creates a phony company, submits invoices to accounting and accounting sends payment to a P.O. Box," says Gill. In one case, Gill recalls, an employee who set up a fraudulent business through which he submitted preprinted, consecutive numbered invoices to his employer every few months. When outside financial professionals examined the invoices, particularly the invoice numbers, it seemed funny to them that the business submitting the invoices didn't have other clients or was having an extremely slow year since each consecutive invoice was sent to the company. A surprise audit also can uncover duplicate invoice amounts and duplicate invoice numbers, both of which can be red flags for possible wrongdoing.
6. Create a fraud policy. "Don't create anything complicated," says Gill. Simply inform employees during employee orientation, training programs, memorandums, or other communications that fraud is not tolerated and let employees know what to do if they suspect fraud. Also, be sure to inform employees of the actions the company will take if it suspects or determines fraud has been committed.
7. Enforce mandatory vacations. "Our research has shown that if employees don't take vacation, it can be a red flag," says Gill. "They're afraid to go on vacation because someone is going to find out that something is not right." Requiring employees to take time off can aid in the prevention of some frauds.
Steal from My Own Company?
My partners and I at B2B CFO® have over 4,000 years of cumulative experience assisting businesses in developing internal controls to prevent and detect employee theft and fraud.