Finances

Best Business Practices Every Company Should Use to Prevent Fraud

Fraud. Embezzlement. You hear these words all the time. Businesses face crimes inside their company all the time and no one is exempt. There is always some sort of way that an employee can abuse his situation and hurt your company. Here are five things that you can do that will help your business prevent employee theft.

Segregate Accounting

When client receivables, paying invoices, managing cash, and other such functions are handled by one person it is too easy for fraud to be unnoticed. Make sure that the person who logs or manages the accounting functions and the person who handles the actual cash are two separate people so that they can detect when there are discrepancies between the two.

It’s always a good idea to get a third party to audit your books as well to keep everyone at your business honest. Plus, it can help you notice things that you normally wouldn’t have noticed such as underperforming products.

Force your Employees to Take Vacations

If an employee is committing fraud, they will typically try to work longer to cover their crimes. Make sure that all your employees take a vacation at some time so that other employees can review their tasks and make sure everything looks alright. Usually, the employees that are committing fraud will be the ones helping their coworkers in order to gain trust.

Internal Controls

Multiple internal controls need to be created so that fraud can be detected and prevented. Some examples of internal controls are managing inventory access, restricting access to financial account data, and having more than one person sign on check writing.

Maintaining the internal controls will be just as important as creating them. It can be easy to forgo some controls in order to get something done fast. Even the most honest of employees can succumb to temptation and it will help your employees as well as your company if you make the temptation as small as possible.

Protect Credit Cards

Business funds, including company credit cards or debit cards, should be firmly separated from personal finances as it can hurt both the business and the individual if either side has their information exposed. When your bank accounts are separated properly it will make tracking the business expenses much easier.

Perform Background Checks

Make sure that when employees are handling funds or have more responsibility, you conduct a background check for the past 7 years. Many small businesses do not perform background checks as it can be costly and takes time, but it is important that employees who will be handling money or any other sensitive matters have a clean background.

Check their social media presence and their financial health as those can both be important resources that expose an employee’s inability to manage finances or a past rivalry with their former employer. Credit reports can be run on prospective employees if they sign a release.

Segregating accounting, employee vacations, internal controls, credit card protection, and background checks are all things that you can do in order to prevent employee crime in your company. Like all things relating to security, there is no perfect fit and the battle truly is never-ending. The best you can do is minimize the risks.

How does your company prevent fraud? Do they use these best business practices to prevent fraud?

icecreamnstickyfingers

Christy has three children. She has over 22 years of parenting experience, including parenting as a young mom, a single parent, and dealing with chronic illness/pain. When she isn't writing, you can find her coloring, playing Candy Crush, and listening to Taylor Swift.

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