If you think your company is too small to worry about employee fraud, consider this: A small business with fewer than 100 employees had 28% higher losses from fraud than larger companies, according to a report by the Association of Certified Fraud Examiners (ACFE).
The report goes on to say that there are three main types of employee fraud:
1. Stealing – Stealing or misappropriating assets takes up a big chunk of the employee fraud pie. In fact 85% of cases deal with theft.
2. Corruption – This covers a gamut of unethical ways of doing business, including bribery of “pay for play” arrangements.
3. Financial statement fraud – Another key threat to small businesses, billing fraud and check tampering can drain a company.
How to Protect Your Business From Employee Fraud?
Sixty-four percent of small businesses report suffering some form of fraud at some point, with only 16% reporting this to law enforcement. Studies have shown that when employees are unhappy, corruption and fraud are more likely. Discontent can come from many sources, whether it’s an unhealthy company culture, tight budgets or anything else that puts employees under negative pressure.
To protect your company from the losses resulting from fraudulent employee practices there are some steps you can take.
1. Do background checks.
Don’t just take a new hire’s or potential employee’s word for it. Run a background check. You’ll improve employee quality and improve the workplace over all.
2. Create a Code of Conduct.
Promote an ethical culture and give employees a way to speak up when they see misconduct.
3. Look for financial red flags.
Do you see employees living beyond their means or who are having financial difficulties. It’s best to be aware of their behavior.
4. Divide finance and accounting duties.
Don’t leave all of the accounting and financial management to a single person.
5. Require employee vacations.
Dishonest employees might avoid going on vacation in order to protect against discovery of fraudulent behavior. Besides, vacations generally make for happier employees, which in itself is a deterrent to fraud.
Is your small business safe from employee fraud? Unfortunately, smaller businesses are more vulnerable, but if you put systems in place and be vigilant in your observations you might be able to recognize fraud sooner or avoid it altogether.
Whatever your industry, it’s a good idea to learn about different kinds of business insurance. Find out more today.