Reducing the Risk of Employee Fraud


Businesses are at risk of fraud from a wide variety of places, not the least of which being their own employees. Some schemes can be relatively simple; skimming a few dollars here and there from the point-of-sale to fund an evening on the town, while others can be serious and involve the embezzling of hundreds of thousands – if not millions – of dollars over the course of several years.

“Employee-based fraud can be difficult to spot,” says Ken Collis, Founder and CEO of  TLK Fusion Marketing. “Once someone gets comfortable with their knowledge of running your business, they may see shortcomings they can exploit.”

It Starts at the Interview

Protecting yourself from internal fraud begins before you’ve even hired someone. Using the interview process to vet prospective employees is crucial to your success, and according to Ken Collis, conducting two interviews instead of one is a good idea. “The first interview can be used to investigate a person’s qualifications and make sure they have the required skills and experience. If someone isn’t able to perform the job you’re hiring for, you should be able to tell at this point.”

Once you’ve narrowed down your number of prospective employees via the first interview, you can invite the best candidates to a second interview to get to know them better as people. TLK Fusion Marketing advises their clients to follow-up on an interviewee’s references and prior places of employment, if applicable. Often times, letting your fingers do the walking will yield information you wouldn’t otherwise get in an interview.

List and Explain the Company’s Rules and Regulations

Be sure to train new employees on how you want things done right from the get-go, and don’t be afraid to establish a very specific system.
For example, having two independent employees count out cash or take inventory can significantly reduce your risk of employee fraud when it comes to the numbers. When one employee’s work is verified by another, whether the first employee knows it’s happening or not, you’ll be made aware of any discrepancies immediately.

When you’re teaching new employees the codes of conduct you expect, be sure to also inform them of any and all consequences if the rules are not followed. “Be sure that, no matter what happens or who breaks protocol, the repercussions and consequences are administered fairly and consistently,” says Ken Collis, “If they see you punishing some worse than others, it will more than likely lead to contempt among your employees, which makes them more likely to attempt to commit one form of fraud or another.”

Strictly Monitor Your Finances

Hiring someone to work for you involves a certain amount of trust, and it’s unrealistic to expect to be able to monitor every employee’s action every minute of the day. When it comes to your finances though, you’ll want to pay close attention. How often to check in on everything will depend on your business cycle, but whether it’s once a week or once a month, you’ll want to make sure that every dollar in and every dollar out is being accounted for.

If your business has employees handling cash or operating a register, you’ll want to look for certain red- flags that could indicate something fishy is going on. TLK Fusion Marketing advises their clients to look for things like abnormal amounts of returns, exchanges, discounts and refunds on a per-employee basis. If one employee seems to be doing an abnormal number of these actions, it could indicate that there’s something going on.

Divide the Responsibilities

You don’t want any one employee having too much control over incoming and outgoing money. Be sure that the person or people who deal with incoming revenue aren’t the same ones dealing with outgoing money. It’s a lot easier for one person who deals with both incoming and outgoing cash to steal from you.

When you have two separate employees, or departments, taking care of these things, it makes it much more complicated from the perspective of someone trying to commit fraud. A person writing checks isn’t going to know what’s coming in and when, which makes diverting funds somewhere else almost impossible.

On the other side of things, the person who sees what’s coming in doesn’t have the power to write checks going out, so if they were to try and divert anything, they will be aware that it would be noticed quickly since it doesn’t follow protocol.

Take Advantage of Check Security Features

The days of waiting in line while the person in front of you pulls out their checkbook at the JC Penny’s store are all but over, but in the business world, check fraud is very much alive and well. Because of this, modern checks have a slew of security features designed to make counterfeiting or altering them extremely difficult.

Whether you’re a seasoned business owner or an entrepreneur who is just starting out, make sure the checks you order take advantage of today’s security features. Holograms, watermarks, and heat-sensitive paper are a few common safeguards to look into.

Ken Collis

TLK Fusion Marketing

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