Otherwise termed occupational or internal fraud, employee fraud is – as the Association of Certified Fraud Examiners (ACFE) defines it – “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the organization’s resources or assets.”
In essence, employee fraud comes about when an employee commits fraud against their employer. Naturally, as an employer, you won’t want any of your employees to do this – but, reassuringly, there are various measures you can take to help prevent it from happening.
Be Careful Who You Employ
Sadly, even a “good” employee can succumb to committing employee fraud if, as an individual, they are under financial pressure. This pressure is one point of what The Thriving Small Business calls “the fraud triangle”, with the other points being rationalizing the act and having the opportunity to do it.
Hence, though you should conduct background checks on potential employees as the Dummies site advises, you should also heed that most people guilty of employee fraud are first-time offenders.
Present A Written Fraud Policy To Your Employees
For various reasons, it would be wise for you to present this policy to every employee, including new ones as they join the company. Many recruits are surprisingly naive about what the term “employee fraud” actually means, and many might not realize just how risky the practice can be.
The document should outline what sobering consequences – like immediate termination – would await a member of your workforce if they were found guilty of employee fraud.
Keep A Tight Grip Over Who Can Access Particular Company Assets
It’s a good idea to carefully segment who takes care of what at your business. For example, you should never leave just one person to monitor your company’s bank statements.
You should, however, keep a relatively short list – if not quite a list of one – of who can access business inventory. Using Zero Trust software from Wandera to imbue just a few people with access would make it easier for you to discern the culprit if inventory starts disappearing.
Insist On Employees Taking Some Time Away From Work
This is important because, often, when a case of employee fraud is discovered, this is when the employee responsible for it is on vacation.
An employee committing fraud can often be reluctant to take time off work when gently pressed to do so. You should be concerned if a member of your team seems particularly reticent about training a “backup” staffer who would assume the employee’s usual responsibilities in their absence.
Carry Out An Internal Audit
ACFE founder Dr Joseph T Wells has commented that small businesses are often especially vulnerable to occupational fraud due to being the least likely firms to have conducted an audit.
For this reason, you shouldn’t omit to carry out an internal audit for your company. That audit can touch on a range of vital questions, including who within your company can access its accounting system and whether or not you, the business owner, reviews monthly bank statements for any signs of wrongdoing.
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