Thousands of small businesses fall victim to employee fraud each year. When this happens, the best case scenarios mean the business loses money. In the worst cases, a small business simply cannot survive an employee’s unscrupulous activity and must shut its doors completely. If your small business is ready to take on its first hires, or if you simply need to educate yourself about protecting an already thriving company, apply the following guidelines to protect your business.
Conduct Employee Background Checks
Sometimes a small business owner will decide to forego doing background checks on potential employees because he or she trusts the applicants and wants to save money. Unfortunately, business owners also sometimes misplace their trust, which is what causes employee fraud in the first place. Spending the small amount of money it requires to conduct a background check on applicants is well worth the potential thousands it could save in the future. At minimum, a business owner should perform a nationwide background check. If an employee will be working with particularly sensitive information, it might be a good idea to take the background check international. Many fraudsters, especially very good ones, have performed their “work” in more than one locale.
Keep Accurate Records and Update Them Often
A small business owner should be regularly checking on assets, liabilities, inventory, invoices, cash registers, safes and every other valuable anyway””it’s just good business. With that said, many small business owners are overwhelmed with so many responsibilities that they don’t check on company assets as often as they should. Unfortunately, this is a recipe for disaster. A problem employee, especially one with access to the company’s finances, is likely to notice which assets you don’t pay much attention to. He or she can then use that information to skim money or commit other types of fraud. If you don’t keep close track of your company’s assets, it could be months before you even realize fraud occurred. For maximum protection, balance out your inventory sheets and other financial information on a weekly basis.
Go With Your Gut Feeling
Even the most attentive business owner can be fooled by a fraudulent employee at first. The problem occurs if you start to notice warning signs but choose to ignore them for fear of overreacting. Perhaps a person has started losing information, paying too much attention to one customer or client or is otherwise messing up on the job. They could be nervous about getting caught doing something they shouldn’t. On the other hand, you should also keep an eye on employees who seem too “perfect.” Don’t let people work after everyone else has left and insist they take their given vacation days. Keeping employees from being in the building when nobody else is will help to prevent fraud. Always investigate if something doesn’t seem right and always follow your gut feelings. They’re right more often than not.
Insure Your Company Against Employee Fraud
Some people are so good at scamming others that even the most diligent business owner falls victim to employee fraud. For this reason, it is important you purchase an insurance policy that protects yourself and your business in the event you hire a bad apple. Ask the company you purchased the rest of your business insurance from if they provide crime insurance policies that cover your company if it is damaged or loses money due to employee theft.
There is no single right formula to protect your business from falling victim to unsavory employees, but being diligent about conducting background checks, keeping up with the financial aspects of your business and listening to that inner voice if you suspect something is wrong is sure to help your business remain free of employee fraud problems.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.