If I were to tell you that US businesses lose over $50 billion each year to theft, I don’t think you’d be too surprised. On the other hand, if I told you that figure only accounted for thefts by employees, it might raise a few eyebrows. Sadly, the latter statement is true, as employees stole over $50 billion from their US employers last year alone.
With the financial pressure from a tough economy wearing heavy on many Americans, business owners across the US are reporting a rise in employee fraud. Whether it happens to be as simple as an employee pulling money from the register or an accountant cooking the books, employee fraud has a significant impact on a business’ bottom line. In fact, the Association of Certified Fraud Examiners (ACFE) estimates that businesses lose up to 7% of their annual revenue to employee fraud, and for small businesses, 7% can add up quickly.
When it comes to preventing employee fraud, small businesses are often at a greater disadvantage due to their lack of internal control over their small staffs. For instance, workers in charge of accounting are often also responsible for other job duties that make committing financial fraud easier for them (i.e. ordering products, signing checks, etc.). In addition, because small businesses are built around having a smaller, tightly-knit group of trusted employees, managers are too trusting and don’t take the necessary preventative actions.
A few months ago, we gave you a few common sense tips to avoid business fraud. However, with employee fraud continuing to be a growing problem for small business owners across the US, we’ve laid out the 5 more helpful tips for preventing employee fraud at small business:
1.) Install security cameras
Although this method might be the most expensive strategy mentioned, it is also the most effective. Truth is, employees are less likely to steal if they know someone is watching them. Keep the cameras focused on areas where money is handled the most, and review the footage if you ever become suspicious. Remember, people lie, evidence won’t.
2.) Review your finances personally
One of the most common reasons why employees are able to get away with fraud so easily is because the ones in charge of the financial statements are also the ones in charge of spending. Make sure you’re regularly looking over signatures, bank statements, deposited checks, and other financial documents so you can spot any fraud as soon as possible.
3.) Set up an anonymous reporting system
26.3% of all fraud cases that were reported last year were discovered thanks to an anonymous tip from an employee. Give your employees the chance to safely and anonymously report any policy violations, and you’ll be thankful you did.
4.) Make employees take vacations
When an employee is stealing money from a company, often times they are too afraid to take any vacation days in fear that you’ll catch on to what they’ve been doing while they’re gone. If that’s not possible, try investigating on nights and weekends while they’re away.
5.) Educate your staff
As mentioned before, your employees can be one of your best lines of defense when preventing employee fraud. Train your employees (new and old) on how to recognize fraud and what to do if they notice it. By doing this, they will become more conscious of their actions and the actions of the people they work with. Remember, if an employee knows you’re looking for fraud, they’re a lot less likely to commit it themselves.
Employees that steal from their companies aren’t always who you’d imagine. In fact, they’re usually in good standing with the company, have worked there for quite some time, and 87% percent of employee thieves are first time fraud offenders. Although you may think that your business is safe from anything like this happening, the reality is that it can happen to anyone. Prevent employee fraud from happening to your business by following these tips and establishing proper control guidelines.