Helpful Tips in Preventing Employee Fraud in Your Small Business
Research has shown that small businesses are often more vulnerable to fraud than their
larger counterparts because they have fewer employees. Companies with fewer
employees tend to have less segregation among duties, fewer internal accounting and
auditing controls. Smaller companies develop closer relationships and trust between
owners and their employees which can cause them to be less suspicious and thus more
susceptible to employee fraud.
Small businesses can protect themselves by making employee fraud prevention a
priority. The following guidelines are elemental steps in creating a fraud prevention
environment in your small business:
•
Implement an accounting solution as part of your fraud prevention. Through
solutions like Peachtree accounting software, small businesses can mitigate fraud
risk through specified user security levels, audit trails as well as through an Internal
Accounting Review1 which identifies common transaction mistakes, departures from
GAAP (Generally Accepted Accounting Principles) and Red Flag transactions. User
security levels are useful in ensuring that employees only have access to the areas
of the business within their specified responsibility and that they have less ability to
cover up fraud schemes.
• Understand your company’s specific fraud risks. Conduct a thorough audit of
your company’s specific vulnerabilities in order to design and implement internal
controls and fraud prevention programs to mitigate this risk.
• Conduct employee background checks. Verify educational and employment
history, as well as references, to ensure there is no previous history with fraud or
other illegal activity. For employees that will manage company assets, it is especially
important to conduct credit reports (if authorized by the candidate).
• Control the bank statements. Having the owner open the bank statements can
help fight check tampering. When dealing with bank statements, owners s