As a business owner, you need to rely on your employees to help run your business, often entrusting in them important jobs like accounting and managing transactions. Because your success relies on them to do their job correctly, it’s important to not only trust your employees, but to also verify your trust.
Unfortunately, it’s common that small businesses don’t uncover employee dishonesty until it’s too late and the financial cost of fraud has become significant.
Did you know…
- 5% of businesses have lost revenue to fraud?
- The average financial loss from fraud is $145,000?
- On average it can take up to 18 months to detect fraud?
- Money businesses that lose money to fraud are never able to recover it?
There are 3 main kinds of fraud that most small businesses experience:
- Stealing or misappropriating money
- Financial statement fraud
How can you protect your small business from fraud?
By enforcing a few added policies and procedures you can help create a trustworthy environment in your small business.
Here are a few ways to protect your business from fraud:
- Use background checks. Just like a realtor background checks potential renters, a background check can give you a glimpse into the stability and decision making skills of a potential employee.
- Look for changes in an employee’s financial situation. You know how much your employee makes. If they suddenly begin living an extravagant lifestyle, this should trigger a conversation to see if perhaps they have a significant other who is spoiling them or are potentially taking extra cash during their shift.
- Create an ethical culture and encourage employees to speak out if they see something suspicious or wrong.
- Divide up financial and accounting duties. This creates a system of checks and balances, so all financial information isn’t kept within one employee. Also, regularly have meetings to review financial documents and your business financial status.
What other tactics do you use to ensure your employees are trustworthy?