Telling the truth about SME life today

Employee fraud could it happen to you

Employee fraud can take many forms, ranging from the submission and payment of false invoices through to accepting backhanders from suppliers to secure lucrative contracts. Often, employees commit a fraud due to personal financial pressures but sometimes greed and a lack of robust internal controls make such opportunities hard for a dishonest employee to resist.

The impact of such a fraud on an SME should not be underestimated. The misappropriated money may be critical for the business financial viability. Dealing with the aftermath of an employee fraud is a huge drain on management time. Damage to employee morale can affect productivity, particularly in small family business built on trust. Knowing how to spot the red flags of a potential fraud and having a robust strategy to prevent, deter and deal with any fraud is therefore essential.

A few changes to your policies and procedures can make your business much less susceptible to employee fraud. 

Read more about preventing fraud:

(1) Take an objective and critical look at your reporting and authorisation structures

Are there any gaps that an unscrupulous or desperate employee could exploit for their own gain Ensure that all payments have to be authorised by at least two individuals as a safeguard against invoice fraud. Carry out spot checks on invoices to check that the goods ordered have been supplied. Take steps to verify new suppliers. 

(2) Know the warning signs that might indicate that something is amiss

Be aware of employees who rarely take annual leave or other time away from the office. Is there an employee who is always the first to arrive, the last to leave and who rarely delegates Does anyones lifestyle seem out of kilter with their salary

(3) Check your HR policies

Does your data protection and monitoring policy give you the right to monitor employees emails and review their computer if criminal activity is suspected Do your employees know this Can you suspend employees with or without pay

(4) Consider employee fidelity insurance

This can cover the costs of investigating an employee fraud and recovering misappropriated assets as well as the loss sustained. 

If you do find yourself the victim of an employee fraud, the key is to act swiftly and decisively.

Read more about how to preserve and recover the proceeds of the fraud.


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