The issue of fraud is a big subject to tackle in business. It throws up a whole manner of questions about your ability to protect your company from external threats, internal threats, and the ethics it may bring up about your employees and how they view the company.
There are some approaches to take inside the organization apart from the typical book audits, inventory checks and going over the financial statements on a regular basis, there are some actions you can take so you can protect your business, but also you and your staff members.
Do you have a code of conduct
The first thing to really think about is your code of conduct. The ethical behavior of anyone in an organization that is questionable should alert you to set a standard for how you expect your company to conduct itself.
Making a statement that you do not tolerate illegal or unethical behavior should be a given, but as this can be something that is a regular occurrence in business, you need to ensure there are tight controls around certain aspects of your security protocols, such as cyber security.
The type of business you are operating can, to an extent, dictate the level of strict measures on your code of conduct. But it is important to set a precedent and to make sure that your employees understand the code of conduct by signing a confirmation or by reinforcing the repercussions of not complying with the code.
And while you need to set a level of compliance when it comes to following the rules, it will mean nothing if you don’t follow the rules yourself. You need to set an example in this arena because if employees see you cutting corners by taking documents home or making personal allowances for yourself to the detriment of the company, what use is setting any rules? Leading by example also means following the rules. Not even you are above this.
A security system can make a big difference
Setting up a system where people have different duties is a good preventative measure when it comes to the handling of money-related tasks like checks, deposits, transactions, and filing these documents.
In a small business it is a given that someone will be in charge of all of these aspects, but if you suspect any fraudulent activity, and to prevent anything of this magnitude, it can be viewed as foolish to assign all these duties to one person.
A quick solution to the financial dealings is to assign one person to be responsible for the received funds, such as cash, supplies, merchandise, and checks, and have one person take charge of the outgoings, like the payments, orders, products, etc.
This is a very good approach in a small business setting, and if your company is a lot bigger, then assigning one person in each department is as useful.
Don’t rule out policies and procedures
Policies and procedures are so important to the running of a company, but it is also common sense when it comes to the handling of sensitive information and also the finances. Every month, when settling the bank and credit card statements, it would be better to have someone who is not the bookkeeper do this, and they should not have access to the accounting system.
This system of compartmentalizing the processes is in some respects long-winded, but an essential procedure to implement when looking at the finances and handling of bank statements.
If someone who was working with a client and not directly in your control took a company card and ran up insurmountable debt, without a suitable system, it would take longer for it to be noticed.
Using a BIN checker to track down the original bank source will reveal that it was your company card, but it would take some time to figure this out. The notion of security in the company can be aided by an approach of this type.
Another way of preventing fraud is to have the transactions, like payroll, authorized by HR, entered by the accounting department, and then have management check it, so there is a three gated process.
And if you are entrusting clients and potential strangers with company cards, having a lock and key system, or strict computer access will be another security layer that is an intelligent move to make.
Begin to observe
The final action to take is a simple one, observe. Look at people and how they behave. Sometimes it is something little that is giving the game away. Has a file been misplaced? Is an employee a bit more self-sufficient than they usually are?
Do they not want any help and require they be left alone? Even something as basic as an employee not taking any leave for a long time or working late/starting early every day could be a small sign that somebody has something to hide.
If these people have access to important files, documents, or finances and they are working 50 hour weeks, it is very unlikely it’s because they love their work! Insist on your staff taking leave or working in the normal business hours.
And don’t forget, nobody knows your company better than you do. If you have the feeling that something isn’t right, investigate it. Probe further into it. And make sure that your processes are airtight, which leaves little room for holes.
Trust is one thing in a small company, but it is very easy for someone to betray that trust if it means they can get away with squirreling money without anyone noticing, they probably will.
Security and vigilance are things that are constantly talked about, and with the increase of cybercrime and fraud taking place in every type of company, it means you need to be a lot more observant in how you enforce rule and policy.
A smaller company is a lot more difficult to police because people are wearing many different hats and duties are mixed up, but by creating a simple set of rules and working on compartmentalizing key aspects of the finances and security processes, the business will be a lot more efficient in its fraud prevention.