No small business owner wants to believe that their profits could be disappearing under the table – and certainly not by employees they trust. The Association of Certified Fraud Examiners’ (ACFE) 2014 Global Fraud Study revealed that organizations lose a median of 5% of revenues each year due to business fraud. And it’s not just revenue.
Businesses also suffer indirect costs, including decreased employee morale and productivity as well as effects on their brand and reputation. Bigger companies have learned that if they want to succeed, they have to do the things necessary to prevent fraud before it happens.
As a small business owner, you may have limited time and resources to dedicate to the cause, but with even just a little effort, you can take the following steps to fraud proof your business just as effectively as the big guys:
Hire competent & trustworthy employees.
Learn as much as you can about a potential employee’s character through background checks (criminal history, civil history/fraud-related lawsuits) their employment history, education and references.
Implement internal checks & balances.
When two or more employees are responsible for the financial duties, it helps to eliminate the risk of a single employee embezzleing funds without anyone noticing.
Periodic audits, whether scheduled or unscheduled, are the best way to detect and deter fraud. Schedule an external audit at least once a year.
Implement an anonymous reporting policy.
Create an environment where employees can feel safe to anonymously report suspected incidents of fraud within your company without feeling like they are risking their job or peer relationships.
Enforce mandatory vacations.
An employee who never takes time off work is a red flag for fraud. Safeguard your company by implementing a policy that requires all employees to take at least five consecutive days of vacation each year.
Take Security to the Next Level with Sage 50
Sage 50 has features that are designed to help you protect your business:
- Built-in audit trail – Keep a transaction history so you can see when a person enters, edits, or removes data. This not only helps you find mistakes and determine appropriate employee training, but also alerts you to fraudulent activity that may require action.
- User profiles – Specific profiles will ensure employees only have access to certain areas. If you have a lot of employees, create role-based profiles to save time. Either way, select from over 100 specific areas to give add, edit, view-only or no-access rights. To get there, go to System -> Set Up Security Now.
- Internal accounting review – This feature searches data for potential mistakes or fraudulent activity and allows you to generate comprehensive reports. To use this feature, go to System, in the Data Integrity section find Internal Accounting Review and click on Run Report.
When it comes to preventing fraud, it’s your job to foster a culture that places an importance on honesty and integrity. Don’t take a lax approach. Your employees are watching you; set an example as a leader and stick to the policies and procedures put in place. This will help everyone get on the same page when it comes to preventing and eliminating fraud.