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  • Posted by: Dante Odoni

Protecting Your Business: How to Detect and Deter Fraud

Never think it can’t happen to you, your business, your store, or your team. Fraud is an insidious crime that will hide in plain sight before entrepreneurs and optimistic C-level executives alike. The perpetrators of fraud can be executives down to employees, even contractors and customers have the means to commit fraud against your company if you let them.

Data shows and most experts agree, that the most costly threat of fraud comes from within. In fact, The Association of Certified Fraud Examiners (ACFE) estimated that businesses lose 5 percent of annual revenue to fraud by employees and officers.

If you would rather not let that happen, here are some of the best, and simplest, ways to deter fraud, and ultimately catch the crooks if they try.

Develop your Anti-Fraud Policies

Work with an expert to develop a policy that ensures work practices are followed. Develop written procedures that will institute checks and balances and divide key responsibilities. This will help detect fraudulent activity, thereby deterring the same.

Learn to Love the Whistleblowers

One easy way to catch fraud among employees is to develop a safe and anonymous system for reporting issues. An anonymous “Tip-Off Box” can work well, but could be subject to abuse. Make sure that, if you do use this method, you assign an impartial individual to review any tips, for peace of mind’s sake. The last thing you want is for the real criminal to evade detection by pinning their personal pilfering on another person.

Audit. Audit. Surprise! Audit

Announce an internal audit. Perform an internal audit. Perform an unannounced audit a few months later. Wait another couple of months, then hire an external entity to come to perform a routine audit, and repeat that one every year. Here’s why: The more audits, and types of audits, to which you subject your staff, accounts, and inventory, the more likely you will be to catch ongoing acts of fraud. Additionally, if your business is a certain size, it becomes legally necessary to have an external audit performed yearly, and a history of that habit from a growing company looks good to investors.

Develop Good Inventory & Account Tracking

Very few of us are accountants, and we all have to trust the accountants in our lives implicitly. Find good ones, accountants that you can trust to help you set up an integrated system of account and inventory tracking. Nothing deters the potential fraud as much as knowing that a team of accountants will notice the missing stock, time, or cash.

Perform Background & Credit Checks

Short but sweet, there is not much more to say about this one. You are less likely to end up with an employee that steals from you if you weed out those that have a bad financial history or a criminal bent. Generally,  the hiring of convicted, hopefully, reformed, felons, or those who are in dire financial straits, is always encouraged, but if the background check uncovers a long history of fraud and embezzlement, you will be glad you had checked.