According to a Global report on fraud and abuse, US businesses lose approximately 5% of their gross revenue to fraud every year. And with other studies suggesting that businesses continue to experience fraud year after year, it is advisable to be proactive about preventing such activities and the associated revenue loss. Below are some effective fraud prevention strategies to consider for your business.
- Monitor vacation balances
It is impressive to have an employee who never missed a day at work or barely took a work vacation. As loyal as they may seem, it could be a sign that they have something to hide and are concerned that their fraudulent activity may be uncovered when they leave the office for an extended period. It can be useful to have a system where you can rotate staff to different jobs inside the business to prevent this. This way, you can minimize or disclose fraudulent conduct since a second employee will go over the first’s work. This can also be effective for boosting employee productivity.
- Work segregation
It is never a good idea to allow your employee to supervise or correct their work. An independent check can deter fraud since people become less inclined to commit them when they know their work is being scrutinized. Segregation of tasks is a crucial internal control strategy that aims to reduce the chances of recording errors or fraud cases by confirming that no employee can perpetrate and conceal errors or fraud during their work. A few common incompatible tasks you should consider segregating may include approval or authorization, asset custodianship, transaction monitoring, and activity reconciliation and control.
- Put everything in writing
Documenting your fraud policy establishes the tone and keeps everyone aware of your position. Companies usually have an ethics policy that specifies your expectations relating to the business’s ethical climate. Having a written fraud policy on what behaviors you consider fraud and how those involved will be punished can be useful. A fundamental component of any fraud prevention and detection approach is the tone from the top, so keep this in mind. Your employees and customers must understand that you take the threat of fraud seriously and will take the strongest possible action against employees and third parties who commit them.
- Hire trustworthy experts
Your employee can play a vital role in developing anti-fraud rules and procedures. Yet, not all have the skill or expertise to provide the best service for your business. For instance, accountants, auditors, and other professionals may have access to sensitive business data, so you want to hire the right staff to provide excellent and trustworthy service. It is not surprising that many businesses prefer outsourced accounting services for their bookkeeping, payroll services, training, and other business advisory services.
While fraud perpetrators do not discriminate, they can cost you huge financial loss, legal costs, and severe damage to your reputation. Fortunately, these strategies should help you prevent and uncover fraud in your business, so keep this in mind.
