How to Detect and Prevent Fraud within your Company

Internal fraud can happen to any business. I’ve seen many incidences of betrayal, theft, and business crashes in the performance of my profession as a bookkeeper in Brisbane. I can only attribute internal fraud to laxity. Trust is a very expensive commodity, and when money and power are involved, betrayal can happen even within families.

So how do businesses avoid and prevent fraud from happening?

Vigilance, checks, and controls. Here are the red flags of fraud, and how to best avoid them;

Red Flag – Autonomous Worker

Independent workers are company assets, but when you notice someone working beyond office hours, not taking paid leaves, and refusing help – take a closer look.

Preventive Measure – Create cells, mini teams, or buddy up partners to be responsible for each other’s tasks and performance. Regularly move people around – assign different partners or tasks, or change teams. Changes should be unexpected and quick to prevent anybody from covering their tracks. Cross train employees so they can check on other’s work.

Red Flag – Controlling Supervisor

Do you have a supervisor who does not consider other’s opinion and refuses to delegate tasks?  He or she could be hiding something.

Preventive Measure – Let your new supervisors know of the company’s spot checks policy – and implement it. Background checks will give you a certain degree of employee confidence, but do not rely on it entirely. Make sure that you have backup keys and/or override authority to all company files. Create a fraud hotline to encourage employees to report any incidence of fraud.

Red Flag – Late Reports

Missing the deadline once or twice can be excused, but if you have someone constantly missing the deadline for submission, it’s time to look into those reports.

Preventive Measure – Ensure that the person doing the reports have enough time and resources to accomplish the reports in time. Determine the reason for the reason of the late submission. If the person is swamped, send someone to help or delegate reporting to someone else. Late reporting is a strong indication of hiding. It is best to have an external bookkeeper in Brisbane take a look into it.

Red Flag – Missing Documents

There is a reason why cheques, invoices, receipts, reports, and other business forms are numbered. Lost documents should be dealt with thoroughly.

Preventive Measure – Periodic audit of reports is a good way to keep your documents in track. Have your bank statements delivered to you directly. Physically secure important documents, limit access to the files, and check for missing documents often. Require employees to report lost paperwork at once.

Red Flag – Disappearing Funds

Can’t seem to get your bank reconciliation balanced? Do you see entries for expenses that should be less or should be there? There’s a possibility of funds misappropriation.

Preventive Measure – Assign different employees to conflicting positions. The treasurer or petty cash officer shouldn’t be the one in charge of purchases or disbursement reviews. Have a good cash disbursement process that includes proper controls and authorization and records for audits.

Many factors contribute to incidence of internal fraud. Personal need of the employee, the opportunity to do so, and occupation discontent. You cannot control the personal need, but if you can eliminate the opportunity and discontent, you will have a better chance at avoiding fraud. Happy employees in a positive work environment will do everything to stay in their jobs. A well-experienced and licensed Brisbane bookkeeper can help you devise and implement audit controls to your business processes. After all, only calculated risks are allowed in business.