While you trust your employees to help your business succeed, it's essential to stay vigilant against potential fraud. Employee fraud can have serious consequences, including financial loss, damage to your company’s reputation, and decreased morale. Understanding the common types of employee fraud can help you take proactive measures to protect your business.
Expense Reimbursement
This is when an employee submits additional expenses to be reimbursed for things that never actually occurred or is not actually business related. If you require traveling and cover the expenses, sometimes employees can misuse company credit cards and use them to fuel personal trips. As a business owner, always require receipts for all expenses and explanation of any purchases that seem unusual.
Check Fraud
When writing a check for the business, the employee can also write another check for themselves and put the same memo for both checks. 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 looking over 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, the employee is trying to receive more compensation that they are entitled to. Examples of this would be employees punching in time for other employees, employees claiming hours they did not actually work, an employee taking another co-worker's paycheck and cashing it for themselves, or an authoritative employee creating a fake employee to add to the payroll and collecting their paycheck. Stay up-to-date on your books to avoid and catch if this is happening to you.
Asset Misuse
Sometimes employees will take advantage of company products or resources for personal gain. This can range from taking small products like office supplies to large scale products like high value technology. This can even include manipulating records to cover up for any missing items. Asset misuse can lead to slower production rates and even financial loss.
While most employees are trustworthy, it only takes a few instances of fraud to disrupt your business. Implementing strong internal controls and regular audits can help safeguard your company.
