Three Signs Of Fraud That You Need To Know About- And Two Things You Can Do To Discourage Fraudulent Activity
Estimates claim that the typical company loses five percent of its revenue to fraud each year. Over time, even small theft cuts into a business's bottom line, and it can even destroy an entire company. Check out three common signs of fraud and a couple things you can do to discourage employees from engaging in fraudulent activity.
1. Excessive Returns or Voided Transactions
Though some returns or voided transactions are normal, a large number of either is a possible sign of employee theft. The employee voids a legitimate transaction or issues a fake return and then pockets the cash. Examine the returns or voided transactions for a pattern. See if they occur during the same shift or are processed by the same employee.
2. Lack of Supporting Documents
The business should have supporting documents to back up the transactions found in its ledger. For example, if a check has been issued for payment, there should be an invoice or sales slip that corresponds to the payment. An occasional missing document usually isn't cause for alarm, but repeated lack of documentation requires an investigation.
3. Numerous Invoices with Rounded Amounts
If it seems like every invoice has a nice round number, it is time to examine the books and the supporting documentation for the transaction. An employee who wants to steal from the company might round an invoice up to the next $5 or $10 or even $1; since the amount is relatively small, the employee hopes that the theft will go undetected. However, if an invoice deals with multiple invoices each day, these small amounts quickly add up, resulting in a notable loss for the company.
How You Can Discourage Fraud
Though you hope your employers and co-workers are honest, dedicated employees, an individual may act dishonestly when given the opportunity or when desperate for cash. Implement the following procedures to minimize fraud.
Conduct Surprise Audits
You should conduct surprise audits at random for every employee. Make sure that the audits are truly random so that employees never know when you might check their work. Some of the things you might do during an audit are check cash counts, reconcile accounts, or look for the proper documentation through forensic accounting.
Make Sure There is Always a Paper or Electronic Trail
Make sure that your company's sensitive information is secure. You want to know who is accessing the information and why he or she is doing so. For example, if you keep paper files, put the files in a locked room accessible for a key code. Limit who has the key code and add a sign in sheet for employees who need to access the information.