Employee Fraud Can Have Serious Repercussions on Your Small Business

employee fraud
Steal cash register money

The struggling economy has not only impacted the return on investment (ROI) for countless small businesses, but it has reinvigorated an age-old problem, employee fraud.

As more and more employees’ nationwide struggle to make ends meet, it is not uncommon to hear of additional cases of employee fraud. It can be the smallest of things in both what is taken and its value, but the bottom line it is still theft.

From actually stealing cash on-hand, to using the business credit card when not approved, employee theft can have severe negative financial outcomes, especially for smaller businesses that find it tougher to recover.

When it comes to smaller businesses, many do not have the apparatus in place to search for fraud, meaning it oftentimes falls on the business owner or his human resources or bookkeeping head to monitor things.

In the event you as a small business owner are worried about employee fraud in your office, keep these factors in mind:

  • Prevent the problem in the first place – Even though employers likely want to give each new employee the benefit of the doubt, make sure you thoroughly vet each and every individual who comes to work with you. If you’re running a small business where some employees are handling cash, checks, money orders and so forth, hiring someone who lost a job over a fraudulent money issues doesn’t make much sense. Be sure to give each and every candidate who comes to work for you a strong background search so you don’t welcome trouble;
  • Employee fraud comes in all shapes and sizes – While some fraudulent situations are easy to uncover, others can take weeks, months or longer. Review with those in charge of monitoring such items what they need to look out for, how they can go about reporting it, and how not to tip off the suspect employee;
  • Review the ramifications of such actions with all employees – It is important not only when you hire someone, but also during their tenure with you that you review the consequences of employee fraud. Not only should employees be reminded that they could lose their jobs over a fraudulent activity while on the job, but they also could face legal repercussions. You should also meet with your entire staff at least once a year to review these rules and regulations. Yes, it may seem like you are beating a dead horse, but a little reminder now and then does not hurt;
  • Spread the wealth around – While ideally you want one person overseeing the books or handling the cash/credit expenditures that means you will have to invest a whole lot of trust in that individual. You may want to reconsider and have several people involved in the process so that there is a checks and balances process in place. It may mean a little extra work for individuals, but can prove worthwhile;
  • Don’t tolerate fraud – Even the smallest of employee fraud actions is an assault on your business. While you may want to forget and forgive, one small aggression can lead to more serious actions by your employees.

As mentioned earlier, there are a number of means by which employees can commit fraud against their employers.

One of the more notable ways is by abusing company credit cards.

Whether it is to run to a local store for office supplies, dining out with a potential or current client or traveling to a conference to represent the company, employer credit cards often enter the picture. When that happens, employers need to be sure to ask for and receive a receipt that details all expenditures.

Whether it is just a small bill or a sizeable one, do not take no for answer if an employee says he or she cannot find their receipts, yet you then find large expenditures on the company credit card.

Given the fact the majority of your employees are on the up-and-up, you should not have to deal very often with employee fraud, but don’t fool yourself into thinking it cannot happen.

About the Author: Dave Thomas, who covers among other items business proposals and small business loans, writes extensively for Business.com,an online resource destination for businesses of all sizes to research, find, and compare the products and services they need to run their businesses.