Dishonesty at work: Six ways to prevent fraud

Some of the biggest losses that companies have to face don’t come from burglaries or shoplifters.

According to this article, workplace fraud costs businesses in America $50 billion per year.

The problem with fraud by an employee is that it’s often long after the crimes have been committed that employers discover the scheme. Honest mistakes do happen in accounting, especially in smaller businesses. Dishonest mistakes, however, happen all too much. With the proper processes in place, the risks can be minimised.

The one thing that will help you to keep those processes and procedures in place is vigilance. You are a leader of a company and you can’t watch everything all the time. This is why you hire in accountants, but you have to trust them. The general opinion from most company owners is that they don’t believe that fraud can ever happen in their business. I’d advise you to think again.

The majority of the time, fraud occurs in smaller businesses, as they don’t have the same level of security and control that the larger corporations have. It can be a very big problem for smaller businesses, and the more that you know about fraud and fraud prevention, the better off you will be. You will be able to examine your cash and the accounting practices that you have in place on a more regular and random basis.

Fraudsters come in all forms, and with the help of companies like, you can ensure that any concerns that you have are investigated properly. Studies have shown that a guilty employee is most likely to be a woman working in a financial role who acts alone. Prevention is the best thing that any small business can do to ensure that they minimise all risks of fraud.

They cannot be completely eliminated, but that doesn’t mean that your business cannot be on the lookout for the four ‘D’s of fraud reasoning:


People who steal are usually desperate and it normally comes down to a level of debt.
Divorce. A sudden shift in relationships at home can trigger a ‘self-destruct’ in a person, and they no longer have a care in what they do.


When someone is under pressure from an addiction, theft is a desperate measure to feed a habit.


This is probably the worst one. An employee with a grudge is one that goes out of their way to seek revenge, and financial revenge is common.

You may not see any of the above issues in your staff at work, but that doesn’t mean they’re not there. Employees have personalities that they don’t often show at work; you probably do the same thing. There’s every chance that you wouldn’t notice if your staff are going through a hard time and that doesn’t mean that they can commit a crime of opportunity just because they didn’t have the right attention paid to them.

Putting the right things in place to prevent an opportunistic crime is important, and you’re asking for trouble if you don’t have those procedures in place. Protection matters, as it’s your reputation and your assets that are on the line in the end. There are things that you can do to ensure that the right protections stay in place, though, so don’t panic.

We’ve put six of the best preventative procedures for employee fraud and embezzlement below:

Share the load

As a small business, there is every chance that you only have one person managing your finances and accounting, so it can be difficult to spread out the financial load among more than one employee. There’s a certain level of trust that you should be able to have in your staff, but when it comes to finances you cannot be too careful. However, if you have a receptionist or a PA, you could have them open all mail that comes into the office, while your regular accountant does the normal duties for payroll.

You can uncover mail that denotes unpaid bills or late notices this way, as your PA would be unaware of the suspected fraud. It also ensures that any financial checks and payments that are received are processed correctly.

Review the finances

You don’t have to be a financial genius to be able to spot irregularities in your own business, simply by doing a monthly review of all incoming and outgoing. Sitting down with the accounting team and going over the expenses and reviewing any irregularities should be an important part of your month. You get a chance to ask questions about any changed amounts, and you’ll be able to see whether there have been any discrepancies in the balances. It’s not a nice thing to have to do: you want to be able to trust that your business is going to be managed correctly. It’s a necessity though because mistakes happen – even the honest ones.

Push the vacations

We all have encountered that member of staff who is so loyal that they never take any time off work. Day in and day out they are there, vigilantly ensuring that their job is managed correctly and not passed off to anyone else.

While on the one hand, this could be completely innocent, the other hand wants to know why vacation time is not being used up – if at all. By enforcing vacation days, you could be able to weed out anyone protective over their job to an uncomfortable degree. Someone covering the potential thief could be able to find mistakes, and a pair of fresh eyes can see when procedures are being ignored in favour of other activities. Force vacation days on staff as a blanket rule, and then you can gain more clarity over a bad situation.

Proper paperwork

Paperwork is a vital part of the puzzle for you as a business owner. You need to be able to trace every single payment for at least a year so that you can ensure that you know where your finances are going. At any point, the bank or your investors could raise questions and you have to know the answers.

Purchase orders are probably the best way that you can tighten up the process of money leaving your company without your knowledge. By needing approved signatures for all things bought for the company, down to the pencils and their sharpeners, you can minimise the risk of overinflated payments to suppliers and even additional stationary that isn’t needed. Making sure that you have a paper trail for all purchases means that when you go over the books, you can link every outgoing to a receipt or a payment made.

Be the last

When you run a business, everything stops at you. Accountability for everything is in your hands; so those who invest money and time with you and your business to grow it will look to you to ensure things are managed correctly. When the buck stops with you, you take on an incredible responsibility. To ensure that you are staying on top of all aspects of your business, you should be the last person to sign and send any payments. Don’t blindly sign a check and allow someone else to mail it for you, no matter who they are. If you sign a check, be prepared to send it off straight away so that you know it’s definitely gone where it should go.

Protection is more than your job

Cash and assets need to be protected from internal and external fraud at all times. You should ensure that every employee knows all the procedures pertaining to fraudulent activity and transactions. If every single employee in your management team is vigilant about fraud and how the company could be affected by it, it’s easier for people to spot irregularities.

Let the sales team do their own audits, but back them up with random spot checks. Let the warehouse team have a full inventory of products and materials to use as a guide at all times, but double check without notice. By asking everyone in your management team to work with you to spot irregularities, you can be better protected.

Discovering that your business has been a victim of fraud is the beginning, as with the losses that come with being defrauded, you also have the costs of hiring in investigators and forensic accountants to work out the extent of the fraud. You also may need to pay out for IT specialists to trace payments.

The positive thing here is that we now live in a time where the digital expertise at our disposal is excellent at being able to pinpoint where things go wrong. Bringing in law enforcement should be one of the first things that you do, because regardless of why the crime was committed a crime was still committed.

You need to be able to come down hard on fraudsters so that others will see that you do not tolerate it in your organisation. The risks of fraud can be minimised if not erased, and with some vigilance, you can keep your company safe.