How to Identify and Stop Employee Fraud Before It Hurts Your Business
As a business owner, you might feel that fraud only happens in big companies, but the hard truth is that employee fraud can target any business of any size without its knowledge until it is too late. So, here is how you can protect your business from internal fraud.
1. Set Clear Expectations and Maintain Transparency
The most basic tool to prevent an employee from committing fraud is to clearly establish what is expected of the employee and to demonstrate open communication. Knowing what is expected of them as well as being aware that the acts are monitored deters employees from fraudulent behavior. Communicate all company policies, especially those related to financial matters, employee benefits, and ethical standards.
Make sure to hold training sessions frequently within the organization, outlining such company policies and teaching employees what could happen if fraudulent behavior takes place. Open discussions on honesty and integrity can set the stage not to engage in such deceptive practices.
2. Monitor Financial Transactions
The way to find out employee fraud is by keeping an eye on the cash flows of your company. Carry out systematic audits of the accounts, invoices, and statements on credit cards so that all those charged actually make sense. Create a procedure for verification and checks of financial records. Foster openness in all financial dealings such that there would be no hidden loopholes or loops that can be manipulated by an employee.
3. Spot Red Flags of Employee Fraud
It’s essential to know the signs of employee fraud. Employees may not always come out and admit to fraudulent behavior, but certain red flags can give you valuable insights into potentially harmful actions. Keep an eye on any unusual behavior, such as:
- Lifestyle Changes: If an employee suddenly portrays an extravagant lifestyle or starts spending money on costly holidays or new items of luxurious living, then this may reveal that they are misusing the business’s resources.
- Sudden Shyness or evasion: If an employee remains evasive while discussing work or gets defensive about the requirement for his explanation about some of the activities, then this may indicate a larger issue.
- Excessive Overtime: While employees working late occasionally is normal, a sudden increase in overtime without a clear reason could be a sign of something suspicious.
4. Encourage Whistleblowing
Fraud can be detected early if the employees are encouraged to report suspicious behavior in a safe and confidential environment. Employees who see fraudulent activities will usually hesitate to report if they fear loss of jobs or a hostile reaction from coworkers, management, or peers. Whistleblower policies open up a free line for an employee to raise concerns without any apprehension. Providing some sort of incentive for reporting fraudulent behavior can motivate employees to act in the best interest of the company.
5. Conduct Employee Background Checks
Before employing any person, the job applicant’s background should be checked thoroughly. Inquire about a candidate’s previous work experience and take note of instances of deceptive or fraudulent behavior he might have exhibited while working under other employment arrangements. It would thus prevent the hiring of a person known to behave unscrupulously. Such an investigation would then raise flags that link the applicant’s credibility with financial stability, including previous records of embezzlement and fraud-related offenses.
6. Hire a Fraud Private Investigator
To get support when you suspect that some forms of fraud have already occurred or when you would like to prevent it from being exacerbated, you can hire a fraud private investigator. A fraud private investigator specializes in uncovering deceptive behavior and weaknesses in your internal controls and helping you gather evidence to prevent fraud from spreading any further.
An experienced investigator can examine your business from a fresh perspective, identifying gaps that you may have overlooked. They can also provide expert guidance on how to strengthen your fraud prevention strategies moving forward.
Conclusion
Employee fraud could be quite a destructive act against your business, and with timely action, you can prevent it from lingering around for too long. You can lessen the damage if you can identify the earliest signs and implement the right internal controls. Global Pursuit Investigations offers you expertise in private and corporate investigation services that provide critical support to ensure the quick resolution of your organization’s future safety. Their experienced team can dig out unknown frauds, collect crucial evidence, and help you get back to integrity in business.
