Any business and organization will need the appropriate human resources and skills needed to perform tasks and being productive. But to recruit the right employees with the right skills for the job, many organizations will need to do background checks. At the same time, many employees want to show professional decorum and a disciplined attitude in the workplace by working towards the benefit of the organization. Of course, employees are also working to put food on the table and benefit themselves. However, some employees want to commit fraud and make easy money at the organization’s expense and their co-workers.
Many employers want to believe that many of their employees are loyal and have a strict code of morals. Still, some of the most “professional” and disciplined employees in the organization might be tempted to pocket some corporate funds for their own benefit.
Employee fraud is known for being one of the most significant problems in a corporate environment. No matter what your position might be, the job you have to do, and the industry you’re operating with, internal fraud can undermine clients’ trust and can seriously breach sensitive business-critical data and information.
Why Do People Commit Employee Fraud?
There are a variety of reasons why employees will commit fraudulent activities. There are also many ways to commit these acts without their employers noticing until the damage has been done.
According to a report by a group that performs audits, most business organizations will lose around 5% of their yearly income and earnings to internal fraudulent activities alone. Although 5% might not necessarily be a big percentage, this can still be especially damaging for multi-million GBP enterprises. In other situations, employees can leak out sensitive personal information of clients and customers to malicious entities, which can have legal repercussions.
That said, the best way of addressing internal fraud is through preventive measures. Luckily many organizations have been incorporating tried-and-tested means of detecting internal fraudulent activity. Having a plan in motion can prevent future problems that might cost a company or the business millions in revenue.
So what are some effective strategies? Here’s what you’ll need to know.
Incorporating Management and Internal Controls
Firstly, one of the best ways of preventing internal fraud is by having internal controls. These are usually contingency plans and programs that are being in place to ensure that the company’s assets are in good hands. This will also ensure that there is integrity on corporate accounting records.
When everything is recorded and listed down by professionals, it’s easier to detect internal fraud and theft. Fortunately, accountancy support services can help ensure that everything in the workplace and the organization is accounted for. Not only does this ensure that the likelihood of fraudulent activity is kept at a minimum, but resources are properly allocated for different projects.
Most management experts would also suggest segmenting the duties of employees and only giving them certain authorities to different parts of the organization. For instance, someone that is in the cash register should only be limited to their work. This means that cash should be tallied and recorded by one person alone. If the organization is planning on making a bank deposit, then someone else should also do it. Minimizing errors and anomalies should be the priority.
Another known way of fraud prevention is through proper documentation. If receipts and bank deposits are documented, business owners can look at the documentation daily or weekly. Most would also suggest labelling each sales receipt with stamps. Instead of using a signature stamp, you can always have two signatures on your check instead.
Knowing Your Employees
Lastly, the attitude of employees will play a role in the likelihood of fraudulent activities from happening. In most cases, perpetrators of fraud will have a pattern to their movement. In most cases, this is a behavioural trait that they have, which can indicate that they have an intention to commit the acts.
This is one of the reasons why many managers and employers should be involved with their employees. Having a conversation with them and getting to know them more can help paint a better picture of their financial status and standard of living. Still, it’s important to remember that many people have their own reasons for fraud and theft, and there’s no one cause to it.
There are a variety of strategies that can help stop fraudulent activities inside your organization. Remember: those who commit fraud do not discriminate. Whether you’re a small enterprise or a large organization, many industries have lost a good amount of their revenue from malicious individuals. The last thing employers want is to face legal lawsuits and a ruined reputation by a bad apple in the group. The best way of addressing fraud is by preventing it in the first place. Losing an employee that is showing problematic practices is better than losing millions.