Is Your Business at Risk for Employee Fraud?

Association of Business Training
March 4, 2013 — 895 views  

Fraudulent behavior among employees is a big concern for all employers. A business/ enterprise can incur huge loses due the fraudulent activities of its employees. Not paying back payroll advances, paycheck diversion, and an unauthorized pay rate alteration are some of the employee fraudulent activities that are commonly spotted. The employee can also cite false expenses or exaggerate sales commission and figures. To deal with the issue, you will first have to understand the reasons that contributed to the occurrence of an employee fraud. Understanding these reasons will help you prevent the occurrence of such frauds in the future.

Causes of Frauds

The growing complexity in the organizational structure is one of the main reasons for fraudulent activities to occur. Outdated and ineffective control measures and inefficient work supervisors also pave way for an employee fraud to occur. An increase in staff turnover which can in turn lead to the scenario of understaffing is another important factor contributing to fraudulent activities. This understaffing can in turn cause a breakdown in the control system of the organization, thus making it easy for frauds to occur.

Employee Red Flags

There are several employee red flags which can give you an indication that your employee is committing a fraud. Recognizing these indications in time will help to prevent the occurrence of these frauds and will save your business from suffering from huge loses.

If a particular employee of yours is living beyond his means and income, then you have sufficient reason to suspect that he is involved in fraudulent activities. There will be significant changes in the lifestyle of the employee and he/she will be indulging in expensive cars, clothes, jewelry, etc.

If your employee is experiencing financial difficulties, then he/she will be at a high risk of committing frauds. An urgent need of money can drive a person to perform acts out of desperation. Any sudden behavioral changes in the employee should also be given enough attention. These changes can include drug abuse, alcoholism, fear of losing the job, and addiction to gambling activities. You should also be cautious, if you notice an employee turnover, especially in the sections of your organization which are vulnerable to fraud.

You also have a reason to be worried if your employee is refusing to take leave or vacations. This can be because the fraudulent employee may worry that his activities may come into light in his absence. You should also be wary about the past history of the employee. If the employee has any history of performing a fraud, then there is a high chance that he will engage in such activities again.

Preventing Frauds

In order to prevent an employee fraud, you should first have the idea that everyone is vulnerable to do mistakes and anyone can commit a fraud, no matter how much sincere and dedicated he/she may seems to be. If you feel any sort of suspicion, do check it out immediately and clear the air, as soon as possible. As an employer, try to deal with all the important documents and paperwork by yourself, and check out whether there are any discrepancies in the facts stated. Finally, you should also look out for patterns of unusual business transactions that are occurring within your organization, in order to prevent frauds from happening.

Association of Business Training