8 Ways to Protect Your Small Business from Employee Fraud
March 02, 2017
By William Ryan, CPA
Often lost in the craziness of starting, managing and growing a business is preventing the risk from employee fraud. Here are 8 steps you can take to mitigate such risk:
- Thoroughly vet new hires. This can include checking work and education experience, credit history and criminal background.
- Use a secure computer sever with encryption and strong passwords. Don’t store passwords on pieces of paper inside an easily accessible location. Consider using a password storage app, such as SecureSafe.
- Implement a segregation of duties. For example, don’t have the same person open the mail and do accounts receivable and accounts payable. Also consider rotating employees in their duties.
- Have a written policy and procedures manual that codifies the rules and regulations of the organization, as well as the penalties for breaking those rules. Make sure you also offer employee training in the policies and procedures.
- Make sure your business has the appropriate insurance, such as crime/theft insurance or a cyber-liability policy.
- Have an internal and external audit process. Hold surprise audits. Keep good records—preferably automated.
- Mandate that all employees take an annual vacation. This is actually a good way to both deter and uncover fraudulent activities.
- Encourage a climate where employees can anonymously report incidents of workplace fraud. Some firms provide an anonymous, third-party hotline.
Remember, the cost of implementing these measures can be much less than the cost of doing nothing.