Employee fraud doesn’t just hit a company’s bottom line. It also impacts employee morale and requires countless hours of work time spent finding the fraud and repairing its damage. As a rule, corporate time is much better spent devising a plan to …
Introduction
Employee fraud doesn’t just hit a company’s bottom line. It also impacts employee morale and requires countless hours of work time spent finding the fraud and repairing its damage. As a rule, corporate time is much better spent devising a plan to protect a business against employee fraud.
Instructions
Difficulty: Moderate
Know How to Protect a Business Against Employee Fraud
Steps
1
Step One
Verify employee references. Almost every company requires that an applicant provide business and personal references. Very few companies actually check references, yet this can be the single biggest way to protect your company against employee fraud.
2
Step Two
Divide responsibilities among employees. Do not allow any one employee to supervise every step of a financial chain. For instance, have one employee open and list mail containing checks and cash, have a second employee make up the deposit slips and have a third actually make the deposit.
3
Step Three
Cross train your employees. Employees are better able to spot potential fraud by other employees if they know how the process works. Cross training also enables you to periodically change duties among employees.
4
Step Four
Require all employees to take an annual vacation. Reluctance to take time off can signal fear of having fraudulent activities discovered.
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Step Five
Hand out paychecks personally at least once a quarter. Have the employee to whom the paycheck is written sign for the check in person.
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Step Six
Keep checks, company stamps and other financial documentation in a secure place. Number checks sequentially. Require that the original copies of all voided checks be left in sequential order.
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Step Seven
Have written company policies concerning fraud. Make sure that all employees have been trained in these policies and know the company’s penalties for violating them, as well as the civil and criminal penalties.
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Step Eight
Require two signatures on checks over a certain amount.
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Step Nine
Keep original copies of all invoices. Make two people responsible for checking in inventory, entering it into inventory forms and counting it for inventory. Periodically and unexpectedly rotate these duties.
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Step Ten
Protect all computer information with passwords. Change the passwords periodically.
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Step Eleven
Open company mail personally on a regular but unscheduled basis.
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Step Twelve
Have an employee hotline for reporting fraud.
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Step Thirteen
Be accessible for employees and vendors to report fraud to you directly if necessary.
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Step Fourteen
Know your vendors personally. Once a month, check in with them and ask questions about procedures.
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Step Fifteen
Employ an outside auditor on an annual basis.
Overall Tips & Warnings
* While it is imperative that a company protect itself from employee fraud, care must also be taken to protect employee rights when investigating potential fraud. Consult with an employment attorney to make sure that your fraud protection handbook strictly follows the laws in regard to employee rights.
