Tips on avoiding Fraud in your business
Most businesses today suffer from either stealing by customers, stealing by staff, or fraud. I am listing various methods in NO particular order, most of which I have experienced to my peril.
1. Do not let your money or accounts be managed by only one person. To be safe, you need to keep your eye on all transactions at least monthly. I seriously suggest that regardless of the size of your business, that you have a monthly ‘sit-down’ and go over the figures, which is ALL the figures. If the accounting is up to scratch, this will be a short sit-down meeting, however, if it drags on then you have a problem. You should segregate fiscal responsibility among your staff to prevent any single individual from having too much control over financial processes.
a.I made the mistake in my last business of not checking up on my in-house accountant. The banking appeared to be running smoothly and as I was behind with my work, I left it at that. However, this accountant withdrew funds from our EFTPOS account and transferred these funds through another account of his, finally depositing the money back into our bank as a LOAN from him. Total amount was approximately $136,000. Crime: That is FRAUD.
2.If you are not ordering stock yourself, make periodic checks with your suppliers to see that you are in fact getting the correct prices.
a.I once had the experience of our female ordering clerk getting tickets to football matches in return for orders. Two problems there, first she was accepting a bribe that I was essentially paying for, and secondly the supplier was loading the prices, effectively cheating me. Both parties were moved on.
3.Sales desks should be fitted with cameras to deter staff from skimming. You should also make sure that the electronic invoicing cannot be altered after it has been printed. A numbering system needs to be strictly adhered to so that all invoices are accounted for, even if voided or cancelled: this can be done with a system that requires co-party to verify any voided or cancelled invoice.
a.I had a female shop assistant that would fill out the invoice correctly and print it out for the customer who then paid the amount. Once the customer departed, she would alter the amount by either reducing the quantity of products purchased or by discounting the total price before she saved it to the computer. She would pocket the difference. Crime: Stealing as a servant.
4.If you have a few staff, then chances are one of them at least is stealing from you by way of taking stock items, charging you for hours they never worked, doing work for others using your machinery and time, whatever. I was once told by a manager of a large department store in Perth, that they figured around 60% of all theft from the store was orchestrated by staff members and the remaining 40% was by customers shoplifting. Do not take these figures as ‘gospel’ as they would not apply to various other businesses selling different stock. The point I am making here is that staff theft is prevalent everywhere.
5.When engaging an employee, conduct a thorough background check of their CV and historical employment. You need to speak to previous employers and if they are not forth coming with answers, then you know there was a problem there. One question I ask is “would you employ him/her again?” That answer is the one you are looking for…
6.Monitor internet access and use strong passwords where confidential information is stored. It is also a good idea to shield the use of games, social media or private calls. The use of any of these will cost you in lost time expenses.
7.With payment sums over let us say, $200, use a multifactor Identification system. This can be set up with your bank. With sums over say $200 again, you need to have two employees sign off on it. By signing off on payments, the two employees charged with paying invoices need to document that the invoices in question are legitimate. Many businesses have been stung by employees supplying fraudulent invoices so they can pocket the proceeds.
8.Avoid taking and hiding cash payments off the books to reduce your tax. It is not worth the risk, and should an employee find out about cash payments off the book, you are opening the door for theft or extortion as your hands will be tied.
9.If you are putting all your books on a computer, SAVE A COPY!!! Make sure that no copies go home with anyone except you. Use the Cloud to hold sensitive and important documents and Master Copy. Us a STRONG password not kept on your computer and have multifactor sign in.
a.I had the experience of allowing my in-house accountant to use his own laptop and take it home with him. This cost me my livelihood as he defrauded me of around $136,000 and still counting: but worse still, he had the Gun Register (I had a Gun Shop obviously) at home and an incomplete version at the shop. The incomplete version was riddled with errors, over 180 that we found out about. The Police cancelled my Dealer License and closed my 18-year business down immediately the day they walked in to check the Gun Registry. My fault, I trusted him as we both shared military time in Africa, him in Rhodesia and me in Kenya. Just goes to show you that trust is a fragile entity that is more than often broken by those it is entrusted too.
10.Your staff should be made aware of your protocols for payments, invoicing (in and out), record keeping, dual employee signatures on large sums, say $200 upwards, monthly meetings, security on-line and confidentiality agreements. These confidentiality agreements can be obtained online free of charge.
a.If your staff are made aware that you will be looking for non-conformity of protocols, then this will lessen your chances of fraud and staff theft.