Here’s what you need to know to protect your business from employee fraud.
The financial and emotional costs of employee fraud can be devastating to your business. Unfortunately, employee fraud is becoming a bigger and bigger issue for small businesses. In fact, approximately 64% of small businesses have experienced employee fraud with median losses at about $145,000. Don’t leave your business vulnerable to the threat of employee fraud; learn more so you can protect your business from employee fraud.
Three Common Types
There are three common types of employee fraud, asset misappropriation, corruption, and financial statement fraud.
- Asset Misappropriation: Asset misappropriation is the most common form of employee fraud because any employee, regardless of their level in your business, can abuse company resources. Common examples of this type of fraud include stealing company property, forging checks, and using company resources for personal use.
- Corruption: Corruption occurs when an employee accepts bribes in return for favouring a certain vendor. Additionally, corruption occurs when an employee offers unauthorized discounts in exchange for payoffs.
- Financial Statement Fraud: Finally, financial statement fraud is committed by employees who handle your company’s finances. This type of fraud occurs when they inflate revenues, exaggerate assets, and conceal expenses.
How to Protect Your Business
There are several strategies you can try to prevent employee fraud from affecting your business. For instance:
- Screening Strategies: One way to protect your business is by employing stricter screening measures when you are hiring a new employee. Start by conducting a thorough background check and try to contact a potential employee’s previous employers. A little detective work could unveil undisclosed criminal activity or previous involvement with fraud.
- Spot Checks: Another way to protect your business from employee fraud is by conducting surprise spot check of your employees’ work. You don’t necessarily have to subject your workers to constant surveillance, however conducting random inventory inspections and surprise check-ups of your financial books could reveal employee wrongdoing.
- Code of Ethics: Finally, establishing a code of ethics for your business can deter employees from engaging in fraudulent activities. Emphasize fair and legal business practices and encourage your employees to speak up if they notice any questionable behavior. This will help prevent employees from taking advantage of your business.
Try out these strategies to protect your business from employee fraud. Remember, another way to keep your business safe is by having the right insurance protection in place. To find the right policies to fit your needs, contact the experts at Humble & Davenport Insurance. Our dedicated team serves Renton and the surrounding areas in Washington—contact us to get started today.