The emotional and financial costs of employee fraud can be devastating; here’s how you can protect your business.
While employees can be your business’s biggest asset, they can also be your biggest liability. Approximately 64% of small businesses have faced employee fraud with median losses at about $145,000. As a business owner, it’s important that you do everything you can to protect your business. So, to protect against employee fraud, learn more about the common types of fraud and how you can take precautions to prevent it.
Common Types of Fraud
The three most common types of employee fraud are asset misappropriation, corruption, and financial statement fraud. Asset misappropriation is the most common type of fraud because any employee at any level of your business can misuse company resources. Common examples include using company vehicles for personal use, forging checks, and taking money from the cash register. Corruption occurs when employees accept payment or bribes from vendors in exchange for buying their goods. Corruption can also occur when employees offer unauthorized discounts in exchange for payoffs. Finally, financial statement fraud is usually committed by employees that have access to the company’s finances. Common examples of this type of fraud include recording fake revenues, inflating assets, and hiding expenses.
Protecting Your Business
One way to protect your business is to employ serious screening measures before hiring a potential employee. Conducting a thorough background check and speaking to previous employers can reveal undisclosed criminal activity or previous cases of fraud. Another way to keep your business safe is by making sure you monitor your employees and check their work from time to time. You don’t need to micromanage your employees, but doing a surprise spot check of their work can alert you to any fraudulent activities. Finally, you can reduce your risk for full blown fraud by creating a code of ethics for your business. Stress the importance of conducting business fairly and legally, and encourage employees to speak up if they notice any wrongdoings. Having these ethical imperatives in place will make employees less likely to get involved with fraud.
If you own a business, try out some of these suggestions to prevent employee fraud from affecting your company. Remember, another great way to keep your business safe is to have the right insurance coverage. To find a commercial policy that fits your needs, trust the experts at Patterson & Associates Insurance in Richardson, Texas. Contact our team to get covered today.