By: Liz Johnson, Eide Bailly’s Forensic Accounting Department
You have a novel business idea. You hem and haw over whether you should risk it all and take on a new business adventure. You decide to go for it. You invest your time, money, heart and soul into this idea. You then come to find out one dishonest employee has jeopardized it all and you now teeter on the edge of losing your business from this unfortunate situation.
According to the Association of Certified Fraud Examiners (“ACFE”), 30% of employees will commit fraud if given the opportunity and 5% of revenues are lost to fraud annually.
How scary are these stats?
Don’t let “your story” sound like this. Consider the following five steps to help protect your business from becoming victim to employee theft and fraud, from that “one” dishonest employee:
- Establish the tone at the top.
Create an environment and culture emphasizing ethical behavior. Do this FROM THE BEGINNING.
- Have policies and procedures in place.
Implement accounting processes and procedures as well as a fraud policy. (The ACFE has a sample fraud policy available).
- Set up internal controls.
Involve more than one person in accounting functions. Also make sure that you are actively involved in reviewing accounting and financial information such as bank and credit card statements.
- Review your insurance policy for employee dishonesty coverage.
Consider the cost benefit of the increased premiums for protection from losses if something does happen.
- Implement an anonymous third party reporting system.
The ACFE has found that 40% of frauds are uncovered by anonymous tips.