The True Cost of Employee Fraud in Small Business
According to a 2016 Report developed by the Association of Certified Fraud Examiners, small businesses suffered the SAME median loss to fraud as organizations with 10,000+ employees. This staggering fact has resulted in a push by Business Cents to do what we can to ensure that our clients do not have to worry about this problem. If a client’s internal process leaves them susceptible to fraud committed internally, we are their safeguard against it. The way Business Cents employees do things leave our client’s assured that the separation of bookkeeping duties keeps everyone honest and on the right track.
We have a professional service client with two very busy locations on our B.E.S.T™ (Business & Employee Support Team) Bookkeeping Package who prior to meeting us, was constantly months behind on their bookkeeping, at least two and sometimes up to a quarter of a year behind! We were able to get them up-to-date and focusing on the daily processes needed to make their business grow in a matter of weeks. They were able to reduce labor costs by 1.5 full-time employees and increase their profit exponentially. The owner of this company had a process in place that left a less than trustworthy employee with the responsibility of cash and check bank deposits. During our regular account maintenance for this client our very own Lucas Lin, was able to uncover about $31,000 worth of deposits that did not hit the bank as expected.
The Business Cents Solution
Once we noticed, the client was immediately informed, and they kicked off their own internal investigation of what really happened to the funds.
After is was clear that one of their employees had stolen the cash and thrown out the checks from that day’s deposit, they were immediately terminated from their position. This was just one deposit with a major loss associated with it. This could have gone unnoticed for months, costing the company 100s of 1000s of dollars.
We were able to catch the incorrect deposit, help identify the problem within the internal process that allowed that to happen, and develop a solution moving forward to do what we can to prevent that from ever happening again.
Our client were provided a sense of relief, knowing that she has a professional, respectable and knowledgeable team of experts employed on her behalf that knows what they are doing. Our Bookkeeper Lucas, informed us that he was “provided with a sense of relief and empowerment” when he was able to uncover the fraud so quickly, preventing even more loss for our client.
10 Tips on how to Prevent Fraud in your Small Business
To prevent fraud in your own small business the team at Business Cents has a few tips:
- Implement a series of internal controls that include checks and balances on work people perform.
- Clearly document the process that you want followed, so you have something to point to when they say they “Didn’t know any better.”
- Stay on top of your bookkeeping!
- Hire an outsourced bookkeeping firm to stay on top of it for you, if you can’t find the time.
- Only allow certain employees access to your accounting software. Only employees who NEED to be in there should be.
- Customize access for each of your employees within your accounting software, according to their job requirements
- Develop a whistle-blower process and reward program, make your employees want to tell you what they see!
- Incorporate reviews by management into your processes – that time spent may end up saving you thousands.
- When recruiting for internal billing specialists and accountants, be sure to know how to evaluate the trustworthiness of applicants.
- Implement a mandatory vacation policy to allow someone else to take over job functions of co-workers for a short amount of time.
BONUS TIP — If you ever become the victim of fraud committed by an employee, be sure to file a police report after terminating them to prevent any other business owners from having the same problem. Reporting these incidents will ensure that when their next potential employer runs a background check, your case of fraud committed by them will appear as a red flag prior to hire.
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