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Business

This workplace crime is more common than you might think

May 19th, 2015 by

Warning signs for one "f-word" causing annual losses of $3.7 trillion worldwide

 
 
 

Fraud is a serious concern. A 2014 study by the Association of Certified Fraud Examinersfound that the average organization loses 5 percent of revenues annually to fraud - that amounts to nearly $3.7 trillion worldwide each year, according to experts. And, if it affects your company's bottom line - you can be sure it will hit yours too. If you suspect fraud being committed in the workplace it is important to recognize the warning signs before taking action. Here are a few examples of those red flags:

How to recognize fraudulent activity

  • Are accounting transactions recorded in a timely manner? If not, it may signal that an employee is taking extra time to change records.
     
  • Are transactions unsupported or unauthorized? “The dog ate my receipt” is not an excuse.
     
  • An employee consistently submits photocopies instead of original documents.
     
  • An employee refuses to train a backup or accept help during busy times.
     
  • An employee never takes vacation or calls in sick. The employee may be concerned that discrepancies may be uncovered while he or she is away.

If you’ve noticed any of the warning signs described above, it is time to dig a little deeper by reviewing specific financial information. Consider the following questions:

Consider fraud carefully

  • Are trends unusual? For example, are receivables growing at a faster rate than revenues? Receivables may be growing faster because someone is keeping payments customers are making.
     
  • Are supplier payables owed for long periods of time? Consider why authorized bills are not being paid.
     
  • Is inventory missing or are counts consistently off?
     
  • Are there unexplainable expense or revenue variances from one month to the next?

The best way to prevent employee fraud is by taking a proactive approach towards the management of processes and workflows.  Here are a few ideas to consider for your company:

How to prevent workplace fraud

  • Have a strong internal control system. Implement policies and procedures that employees must follow. 
     
  • Place strong emphasis on timely financial presentation.
     
  • Always ensure reimbursements and expense claims are supported by original receipts, and approved by the appropriate supervisor. 
     
  • Make sure when two signors are needed on cheques, the second signor actually reviews the invoices before signing the cheque.
     
  • Always segregate duties when dealing with money to different people, whether it is opening mail, recording or making deposits.  
     
  • Review financial information and look for inconsistencies concerning expectations and trends. If something looks off, be sure to ask questions.
     
  • Use a well known accounting program, and restrict user rights to their specific needs.

At the end of the day, it’s not the norm for fraud to occur but it can happen. By implementing a few controls you can protect your business assets.

 

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