How can you protect your business from fraud?
Fraud is damaging in any business so how can you protect your business? How can you spot fraud or better still reduce the chance of it even happening in your business? Frauds are often damaging, not only for the financial loss, but often more importantly the damage to trust and relationships that it leads to.
This Game plans for growth we are looking at some of the typical fraud warning signs to look out for, as well as reviewing some basic strategies to reduce the chance of fraud occurring in your business.
Very often a fraudster will start small and probably even with the intention of paying back the money. This then tends to grow as the person becomes increasingly confident and eventually over-confident.
So what are the typical fraud warning signs?
1) Unexplained large purchases or holidays.
2) A lifestyle which appears to be out of line with the person’s salary.
3) Any addictions – this might be to alcohol, gambling, or gaming.
4) Extra marital affairs – these can put pressure on an employee’s finances often driving fraud.
5) Small errors or inconsistencies – this could be on expense claims or other purchases.
What can you do about it? How can you help to protect your business from such fraud?
a) Start by ensuring that you recruit the right person for the job – qualified people have more to lose than unqualified.
b) Review how the key duties are arranged – where possible ensure that key responsibilities are segregated (eg. not the same person loading invoices for payment and then making the BACS payments).
c) Review your business controls, particularly how the balance sheet accounts are reviewed, and when.
d) Review how the business costs are controlled – make your managers properly responsible for the costs they incur.
The End Result
If you suspect an employee of fraud what should you do? The first step should be to investigate the position; however remember that the fraud might involve more than one individual. Once you have gathered evidence you then have 2 key options, either going to the police or confronting the person with the evidence gleaned.
Every business owner will want to avoid the cost (financial and relationship) of fraud in his or her business. You can reduce the risk for your business by talking to us or calling me on 01865 78 40 60; we regularly do Finance Function reviews, and can talk you through practical and pragmatic ways to reduce the risks.
If you would like to discuss any matter raised in this newsletter then please do contact us.