Every year, your business loses about 5 percent of its revenue to fraud. This is according to the Association of Certified Fraud Examiners.
While 5 percent might appear small, the picture gets clearer when you crunch the numbers. If your business generation $1 million, $50K is lost to fraud. Can you imagine with you can do with such an amount? You could afford to hire one or two employees!
Knowing how to prevent fraud is key to ensuring your business retains every single dollar it earns. Continue reading for a guide to effective fraud prevention strategies.
Implement Effective Internal Controls
If your employees are stealing from you, it’s because they’re capitalizing on a loophole in your internal controls.
If you’re not sure whether your internal controls are fraud-proof, start by conducting an audit. Hire a third-party service that specializes in auditing accounting systems and other fraud prevention controls.
If there are weaknesses or loopholes, they’ll be identified. The auditor will also recommend ways to seal those loopholes.
One of the most effective ways to implement effective internal control is to use technology. In your business finances, for example, use accounting software that’s known to be fraud-proof. Don’t rely on manual accounting methods. Hey, it’s 2021!
Hire Honest Employees
If your business is losing money to fraud, your employees are at the heart of it.
But here’s the thing. Not every employee is dishonest. In fact, most workers are honest souls. It’s just a few bad apples that ruin the reputation of everyone.
As an employer, you have control over the kind of people you bring to your company. If you hire honest employees, the risk of losing money to fraud reduces.
We know what you’re thinking. How do you measure how honest someone is?
There’s no scientific way to do that, but there’s a reason background checks exist. Don’t hire someone just because they have the qualifications and the experience you need. Use background check services to gather information about a potential employee before hiring.
If you have a dishonest employee, it won’t matter how effective your internal controls are. They can bypass those controls by, for instance, asking for kickbacks and bribes from, say suppliers. Read more about this issue for deeper insight.
Physical Measures Go a Long Way
Are your business premises under constant camera surveillance (where it’s legal to do so)?
Do you have guards?
If you answered no to either or both of these questions, your business is highly vulnerable to fraud. You see, fraud isn’t just about losing money. An employee can steal physical goods as well.
It’s high time you installed a CCTV system and hired some guards if you have stand-alone premises.
Know How to Prevent Fraud in Your Business
Fraud is one of the banes of running a business. But you can stamp it out of your business. With this guide on how to prevent fraud, you now know some of the most effective strategies you can use.
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