Every business, a big multinational corporation or a small local business, is susceptible to fraud. That is the plain truth, sad as it is. Running a business entails working closely with several people, some of whom might not have the best intentions. Fraud of all kinds – from investment fraud to employee fraud to even planned supply chain disruptions – has increased in recent months. And in this age of technology and easy global connectivity, your business could be the target of a fraudster sitting hundreds of miles away in another land. That’s a scary thought, isn’t it?

The good news is there are ways for your business to combat such fraudulent intentions.

How To Protect Your Business from Fraud?

Here are some actionable pointers to help your business stay on guard:

Educating Employees About Anti-Theft Policies

A business is most vulnerable to the people closest to it – its employees. Therefore, the first step to preventing fraud should also address this risk head-on. You can start by officially setting up a firm, detailed anti-fraud policy for your business that covers the various types of fraud and the consequences perpetrators shall face if caught. The policy should clearly outline the business’s Code of Ethics and highlight the moral standards expected from the staff as a company representative. However, simply formulating an anti-theft policy is not enough unless you educate your employees about how hazardous fraud can be to the business and all those connected. You can further encourage them to help prevent such fraud by teaching them ways of identifying and reporting any suspicious activity or behavior in the company, you can make them an active part of your anti-theft system.

Reporting suspicious behaviour of their colleagues is a daunting and unpleasant task, which is why many such cases go unreported, even in the most prominent organizations. As a business owner, it is your duty to make your staff feel comfortable and maintain their anonymity for reporting thefts. You can also declare certain perks or rewards for whistleblowers or even set up an “anti-theft hotline” for your staff to report any red flags. You can extend this service to other people connected to your business, such as vendors, partners, and customers. In fact, according to an ACFE survey, over 52% of fraud cases are brought to light by employees and almost one-third by vendors and customers.

Separating Financial Responsibilities

Delegation of work and dependence on others is a part and parcel of business expansion. Interestingly, smart delegation of responsibilities can be an effective tool in curbing internal fraud in the company. By dividing sensitive tasks such as handling cash, invoicing, banking transactions or other financial responsibilities among two or more persons, the chances of spotting any anomalies – intentional or unintentional – increase, thus deterring any thefts or frauds. For this, you must put some strict internal control measures, such as regularly reviewing invoices or other financial transactions or conducting surprise audits. Calling in a team of external auditors and certified fraud examiners annually could be a better option, as they will do an unbiased and thorough review of your financial documents and trace any irregularities immediately.

Hiring Cautiously

Employees are the backbone of any business. Hence, it is advisable to be extra cautious when hiring staff for your business, especially for high-risk, sensitive departments like accounting and bookkeeping. A thorough background check with verified references can do a great deal to prevent future fraud. So apart from checking on a potential candidate’s educational qualifications and knowledge, you should verify other personal details such as their home address, contact details and criminal records. Another thing that can go a long way in preventing fraud is meeting your employees one-on-one at regular intervals and taking stock of how they’re doing professionally and personally. This makes them feel appreciated, valued and cared for. It is often employees who are going through personal problems or are upset at the company who resort to extreme actions such as fraud. So make sure you take the time to keep them motivated to work for the betterment of the business. Not only will this help avoid fraud, but it also boost productivity and, in turn, the profitability of your business.

Personal Checks

While audits are undoubtedly helpful, it is also essential for you, as the business owner, to stay abreast of the activities happening in your company. Not only does this keep the employees’ morale high, but also acts as a significant deterrent to potential fraudsters. For instance, springing a surprise check of the company’s books of accounts and financial records, including bank statements and inventory lists, keeps you in the loop while also sending out a strong message that the owner is vigilant. This will make people hesitate to manipulate records or make any unauthorized transactions. Also, staying in touch with your bank and checking up from your side are musts.

Sometimes, even suppliers or customers resort to unethical means to gain a profit. Before acting, you could check all communication and transactions with suppliers and review customer complaints and refund claims.

Using Data Forensics: Digitization of business tasks has two sides. On the one hand, using cloud services and digital accounting or bookkeeping practices has made businesses more prone to cyber-attacks. On the other hand, technological advancements have led to the invention of new data analytics and forensic accounting tools. These tools use specialized programs and algorithms to detect any anomalies in financial data. They can also trace the device or user from which the anomaly has arisen, thus pinpointing any potential threats to your business. They can also identify and block suspicious links or websites and detect possible phishing scams.

Insuring Against Theft: No business is entirely immune to financial fraud. So, it’s best to have a Plan B in place by insuring your business to minimize your losses. You can consult a professional accountant to know what kind of insurance coverage should be adequate for your business in case of fraud. You can insure your business against burglaries, cash or securities theft, occupational fraud, cyber theft, and forgery.

Sketching out a strict and effective anti-theft plan needs specialized knowledge and expertise. Therefore, consulting with an experienced professional and putting a plan together right from the beginning can save you financial heartache later. But in the end, it is up to you as the owner to stay ever-vigilant and encourage your colleagues and staff to do the same. Because when it comes to financial fraud, prevention is better than cure.

Contact Glenn Graydon Wright LLP in Oakville for Your Accounting Needs

A professional accountant can help you with the right approach, set up stringent internal controls and systems, and guide you on legal details to prevent fraud. At Glenn Graydon Wright LLP, our trained and experienced accountants provide services such as setting up financial monitoring systems and conducting audits. To learn more about how Glenn Graydon Wright LLP can provide you with the best accounting expertise, contact us at 905-845-6633 or online to schedule an initial consultation.