Central Bank of St. Louis

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  • Employee fraud within your business

    In any business, big or small, you need to be able to rely on your employees. Unfortunately, sometimes an employee can take advantage of your trust. This can be detrimental to your business, its shareholders, and other employees on the payroll.

    reading glasses sitting on a stack of receipts

    In a study done by the Association of Certified Fraud Examiners (ACFE), it was found that 16.5 percent of businesses with 100 or less employees experienced expense reimbursement fraud, and that 12 percent had suffered cash-on-hand fraud [1]. This is more common in smaller businesses than larger ones because they don't have the ability to have extra resources to monitor for fraud.

    So what exactly are some ways that fraud could be happening within your own business?

    Expense Reimbursement
    This is when an employee submits additional expenses to be reimbursed by the business for things that never actually occurred or is not actually business related. As a business owner, always require receipts for all expenses and explanation of any purchases that seem unusual.

    Check Fraud
    This act of fraud is not quickly spotted until thousands of dollars have been stolen. When writing a check, the employee also writes another check for themselves and puts the memo for both checks the same. Most companies who have had this happen to them discover it when their usual bookkeeper is out ill or on vacation and sub has to come in for a short amount of time.

    To help avoid this, always have more than one person signing the checks and reconciling your bank accounts. Also be sure to have an outsider come in once a year to go over the books and don't announce when they will be coming.

    Payroll Fraud
    There are many ways this type of fraud is committed. In general, for all forms it is essentially the theft of money by means of the payroll processing system. Examples of this would be employees punching in time for other employees, asking for an advance and never repaying it, an employee taking another coworkers paycheck and cashing it for themselves, and other similar fraudulent acts that use the payroll system. Stay up-to-date on your books to avoid and catch if this is happening to you.

    This is not to say that all employees will commit fraud or steal from your business. There are unfortunately a few bad eggs that ruin it for everybody. There are many measures you can take to protect the security of your business and its employees. It's important to take those measures to ensure your business is built on a solid foundation.

    [1] Report to the Nations on Occupational Fraud and Abuse, ACFE



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