What Can Small Business Owners Do To Prevent Fraud And Theft?

Discovering that the employees you trust for many years have been stealing from you is definitely devastating. More often than not, fraud and theft happen when you least expect it. When you have trusted people around you, there are no nagging doubts that you will fall victim to these crimes. As a business owner, being cautious is necessary. Even if you have the most trusted employees, fraud and theft can take place when you do not keep your books in check. Here’s a guide to preventing or reducing employee fraud and theft:

1. Post a code of conduct

Some business owners implement stringent policies so fraudulent activities do not go unchecked or unpunished. For instance, Walmart does not allow employees to accept a cup of coffee or a bottle of beer from a vendor without paying for it. It sends a signal to everyone that the company is not tolerating the illegal behavior. Although not everyone can be as strict as Walmart, posting a clear code of conduct will make employees aware that misbehavior is unacceptable. The code should be given to everyone upon hire. There should also be a written acknowledgement to ensure that everyone agrees and understand it. Being the enforcer of the code, employees are also expecting you to lead by example. What is the point of following strict rules if employees see you use company property or take home merchandise?

2. Create organisational checks and balances

For small business owners, wearing many hats is normal, but multitasking can be dangerous if it involves opening the mail, handling payments and deposits and filing transaction documents. These aspects of the business should not be assigned to one person only. Assigning the same task to the same person only spells trouble. There should be separate people for managing accounts payable and receivable, handling purchasing and more.

3. Have clear policies and procedures

While your bookkeeper takes care of bank and credit card statements most of the time, there should be another person to reconcile bank statements. However, this person should not have the ability to modify or enter transactions in the accounting system. The modification must be restricted as this only opens the door to committing fraud. Confidential financial information must be locked up. Enforce rigorous key control and have a computer-system access. It is common for business owners to retain login information without realising that a departing employee still has it. Change your login credentials once the employee leaves.

4. Observe employees’ behavior

A tell-tale sign that your employee is committing or about to commit theft or fraud is when there are changes in their behavior. Have files been misplaced? Are they giving customers excessive attention? Are they routinely working early or late when no one else is around? While you may dismiss it as working extra hours because they love their job, it is also a sign that they do not want others to see what they are doing. Even minor blips in your operation is already a red flag.

Once you feel that something does not feel or look right, it is probably not. Take time to investigate as you could be losing a big amount of cash.

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