As a business owner or Managing Partner with a large corporation, you want to trust your employees, and this includes upper management, as well. You interviewed, tested, and helped train the best candidate available who eventually became a part of your business. After roughly 16 months, you find yourself looking at a case of Occupational Fraud. How did this happen? Oversight. Weak internal security accounts for almost half of the fraud instances.
According to the "Report to The Nations: 2018 Global Study on Occupational Fraud and Abuse," publication, 2,690 real cases of occupational fraud were reported from 125 countries in 23 industry categories with $7 billion total losses. Small businesses generally suffer the brunt of monetary losses in an approximate period of 16 months per case. Employers need internal controls and a trained resource for prevention. An internal audit is generally a good place to start and this can be done by an independent third-party source such as Stellaris Group Human Resources in Roswell, Georgia, by a CPA firm, or by management.
It's difficult to know where to even being to start when it comes to preventing occupational fraud in the workplace, but with a few steps you can ensure your company can be safe:
- Have a system in place where employees can anonymously report or tip you off that someone in the company may be stealing from you in one form or another. Internal tips are the number one method of detecting occupational fraud over other methods and accounts for approximately 40% of the cases reported.
- An Internal Audit is another way to detect someone who may be cooking the books or outright stealing from you. Some signs might include an employee showing up at work all of a sudden with an expensive new car or wearing designer clothes that you are certain are outside of their salary range. Or maybe they are having financial problems such as too much debt or a gambling problem. The reasons are endless.
- Conduct a Management Review and delegate. Preventing one person from managing all of the accounting responsibilities such payroll, accounts payable, receivables, bank reconciliations, financial statements, etc. These responsibilities should be shared among several employees in order to prevent the temptation of occupational fraud.
Overall, implement a Hot Line for employees, vendors, and competitors to tip you off if they suspect fraud. Have a good anti-fraud plan in place. Small businesses suffer greater losses because they sometimes lack the resources larger corporations have in place. If you do not have a Human Resources department, hire one to independently review your current anti-fraud plan for recommendations or guidance. Stellaris Group is located at 570 W Crossville Road in Roswell, Georgia and they offer this service along with every facet of Human Resource Management available for large and small businesses.