How to Reduce Business Fraud

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Net Patrol International Inc.  Data Investigation and Forensic Services
Bankruptcy and Insolvency Trustees

Fraud detection and prevention can help reduce this type of loss, and if you do not have a robust plan in place, this is the time to create one.

Today’s businesses are experiencing more fraud each year than ever before. Issues such as misappropriation and embezzlement of funds can go undetected, leaving you wide open to revenue loss and fraudulent reporting. Fraud detection and prevention can help reduce this type of loss, and if you do not have a robust plan in place, this is the time to create one.

Create Internal Controls

Internal controls allow you to safeguard important assets and keep records accurate. One type of internal control consists of dividing up duties so no one person has sole access to and responsibility for these assets and records. You may have multiple people or departments tallying up sales from certain categories and a different manager tallying up the numbers from all these departments or people.

Another example of internal controls is using digital fleet management solutions for your fleet. Digital fuel management software can reduce fraud from unauthorized purchases and theft of fuel. Implementing digital solutions can also help increase fuel efficiency, saving you even more money. Make sure to document as much as possible so you have a comprehensive record of your numbers. Use a consecutive numbering system for invoices, checks, and purchase orders. That makes it easy to tell if something is missing.

Pay attention to new vendors, as this can result in a billing scheme embezzlement. This type of fraud commonly consists of payment to vendors that do not really exist. Consider having multiple individuals approve any new vendor before a payment goes to them. While setting up internal control programs is an important step, you are not done once these controls are in place. You will still need to monitor and revise them often to make sure they keep up with advances in technology.

Know Each Employee

Those who commit fraud often exhibit similar traits that can alert you to their intention to steal from your organization. Listening to and observing your employees will help you identify possible risks early on. While you may not be able to get to know each employee on a personal level, you can still improve employee training and ensure management is involved with your workers. Have management be on the alert for attitude changes, which can signal there may be a risk.

Perhaps you have an employee who is taking on many more hours because a couple of their team members quit, and they now have a significantly heavier workload. When a manager talks with the employee, the manager may discover the employee is also facing financial issues at home. This combination of signs could indicate that the employee will commit fraud because they feel justified in doing so and feel like they need the money more than the company does.

There could be internal issues you might need to look to as well. It is very common for perpetrators to be motivated by revenge. On the other hand, they may just not care about the company. Another sign to watch for is an employee who seems to do the bare minimum to get by and who only works for the paycheck. Regularly monitoring internal issues can help make your company a better place overall to wok. This can give you happier employees who are more likely to do the right thing.

Create an Anonymous Reporting System

Yes, business owners need to be aware of consumer fraud cases as a matter of ethics. But everyone should be aware of your policy around fraud risk, and this policy should cover types to look out for, as well as consequences for breaking the policy. Someone who is planning on embezzling will understand that management is watching them, and this may deter them.

This policy can also help honest employees understand possible signs to keep an eye out for.

But vendors, customers, acquaintances, and even competitors can also notice signs of an issue and report it to the company. Most of the time, employees are concerned about reporting a possible issue, especially if the employee is not 100 percent certain that fraud is indeed taking place. It’s a good idea to have an anonymous system in place so it is easy for anyone to report. You can set up a website or hotline and make sure employees have access to it.

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