Sure-fire Ways To Protect Your Business Against Employee Fraud

Running a business is a daunting task as you have to handle countless things every day. From managing the money to meeting clients and looking after day-to-day operations, the to-do lists keep you painfully busy. The last thing you want to encounter is employee fraud because it is challenging to deal with. It can hurt your finances, trust, and reputation in the long run. Unfortunately, you are likely to face fraudulent actions of employees at some point, no matter how trustworthy your team is. But you can minimize the risk by implementing a few protective measures within your organization. Here are some sure-fire ways to protect your business against fraud.

Look for red flags

Fraud and embezzlement do not happen out of the blue. In most cases, people siphon funds slowly for years, and you may end up losing a fortune before you know it. A vigilant approach can help you spot the red flags indicating employee fraud so that you can act sooner than later. Look for signs like behavioral changes, living beyond their financial means, and money pressures at home. Be extra watchful if someone never takes time off, specifically if they have access to cash and valuables. The use of drugs or alcohol is another reason to worry. If you notice one or more of these red flags, you must dig deeper to find if something is amiss.

Create a fraud policy

A written fraud policy that outlines the disciplinary action against such actions goes a long way in dissuading employees from indulging in them. Surprisingly, they may not even understand the term and engage in wrongdoing intentionally. Ensure defining fraud in the policy and stating zero tolerance for fraudulent behavior. The policy should also include the investigation process and possible consequences. Immediate termination and criminal charges are enough to keep people from doing such acts.

Conduct formal policy training sessions

Beyond just sharing a fraud policy with your employees, you must conduct formal training sessions to ensure they understand it line by line. Incorporate policy training into the orientation process for recruits. Also, update the policy annually and provide a training session for the existing employees. Reinforcing your organization’s commitment to protecting itself from fraud discourages people from unlawful behavior right from the day they join the company.

Have a defense plan

The implications of employee fraud extend beyond embezzlement and internal damage to the company. The act of your representatives can land you in legal trouble as they defraud clients, vendors, partners, or third parties. Your business may even end up facing criminal lawsuits in such situations. It is vital to have a criminal defense plan and a legal expert to handle such critical situations. Lawsuits can disrupt your operations and cause immense reputational damage, so you must have a plan to protect your company and prove its innocence if the need arises.

Use a safe for cash and valuables

Business owners often go too far with policies and procedures, but forget to implement the basics. You must use a safe for cash and valuables to prevent theft in the first place. It is the simplest way to deter wrongdoers. Limit access to the valuables, leaving it only to a few trusted people. The best piece of advice is to keep the safe combination confidential or share it only with one person who can operate it in your absence. Minimize the number of people handling cash transactions, valuables, and confidential documents.

Implement robust internal controls

Implementing robust internal controls is another effective fraud prevention measure organizations can rely on. Internal controls keep people accountable, so there is hardly a chance of wrongdoing. You must use a system to monitor business operations, track employees inside and outside the premises, and maintain compliance with laws. But remember to review internal controls periodically to ensure they are viable enough. You must also have proper investigation procedures to investigate questionable behaviors and financial activities of the employees. Set up a confidential tip hotline to encourage employees to report suspicious activities within the organization.

Employee fraud often stems from a lack of satisfaction and loyalty. You can address these root causes to prevent such incidents. The best way to do it is by creating a positive work environment and healthy organizational culture. But remember to be stern while dealing with fraudulent behavior within your organization. A firm stance against one person sets an example for the entire team. When people understand the value of honesty, they are less likely to go on the wrong side.