How to Stop Fraud in Your Business


[Guest author up today]

Fraud is a serious offence and can cost companies millions of pounds per year. Often it is the company’s own employees that carry out the crime. This is commonly due to inside knowledge or easy access to a company’s administration and finances. Unfortunately, it is often the people you would expect to be more honest that carry out the fraud, such as senior management and directors. This is because they have unlimited access to financial records.

Examples of Fraud

There are many types of fraud that can occur in businesses. These include cheque fraud, creating false credit notes, stock or asset theft and creating false suppliers and invoices.

Cheque fraud may occur when an employee writes a cheque to replace stolen petty cash. This may go undiscovered because the books will always appear balanced even though the money from the cheque is never debited in the company bank account.

Creating false credit notes is a simple fraudulent activity and therefore can be very common. This involves taking cash from a customer and posting a credit note or changing details on an invoice.

Theft is a common problem for companies, particularly if the stock is easily accessed and transported out of the business premises. Employees who steal equipment from their places of work do so for their own personal use or sometimes it is just taken and then sold on. This allows the employee to make a profit from the sale of goods they have not paid for in the first place.

Even purchasing departments can be caught up in fraudulent activity. Those responsible for sourcing suppliers can find it very easy to create fake supplier invoices and pay the money into their own accounts.

If you suspect that fraud is occurring in your company, you should consult a fraud solicitor in order to start legal proceedings.

How to Prevent Fraud

Cheque fraud may be prevented by ensuring that all transactions are properly checked by a responsible person or persons. The bank could also be instructed to provide regular statements which should also be carefully studied.

Preventing employees from creating false credit notes can be achieved by implementing a system that uses additional documentation for recording all transactions. False invoices can be uncovered by comparing historical information and previous supplier invoices.

Employee theft can be prevented by implementing a number of systems. An effective solution is to use closed-circuit television. This allows company owners to monitor their stock. Dummy cameras are also very effective as long as employees are led to believe they are really recording. Equipment can be stored more securely using locked storage units. For large items, alarms may prove a useful deterrent. Companies with bigger budgets may choose to employ the services of a security guard.

To prevent false supplier invoices being created, a checking system should be put in place. This should monitor the amount of stock ordered and the prices. Purchasing departments should be required to leave an auditing trail so that senior management can review their activity.

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