Dealing with Business Fraud
Fraud is one of the most common ways that businesses lose money. Despite efforts to prevent fraud, the unfortunate reality is that it still happens — in fact, according to the ACFE’s 2016 Report to the Nations, it is estimated that companies lose 5% of revenue each year to fraud. If you suspect fraud has occurred at your organization, take these immediate action steps:
Safeguard potential evidence. Preservation of evidence is key. Secure any and all potential evidence — but by all means, avoid the temptation to examine the evidence on your own. Electronic evidence is fragile and easily altered. Did you know that simply turning a computer off or on can alter potential evidence? Secure computers, cellphones and external electronic media sources such as thumb drives. Maintaining the evidence will help your forensic accounting team identify what occurred, who committed the fraud and why.
Gather a team. Enlist a forensic accountant and computer forensic specialist to help you collect, analyze and store the data. It would be wise to hire an outside financial investigator who is familiar with and experienced in fraud investigations — using an in-house accountant is not appropriate, as they are not as objective as an outside source. In fact, someone on the accounting team may be part of the problem. Retain an employment lawyer to ensure you stay on the right side of the law regarding the rights of the suspected employee.
Deal with the suspected employee. Don’t fire the suspected employee immediately — it could make gathering evidence much more difficult. Instead, restrict their access to company data. Do not let them remove their computer or any other company items and documents from their office.
Notify your insurance provider. A crucial fact for employers to know is that you must notify your insurance provider within 30 to 60 days, depending on your policy. Failure to do so could cause a loss of coverage.
File proof of loss. You will need to document any losses with your insurance provider in a specified time frame. Documenting a claim with an insurance provider takes time to ensure it is properly recorded. It is possible to file an extension should you need one, but be sure not to miss any deadlines or you risk forfeiting coverage.
While you can’t prevent every instance of fraud from happening to your business, you can take precautions to minimize fraudulent activity. To prevent employee fraud and embezzlement conduct background checks on all new employees, particularly those who have financial responsibilities.
Keep financial duties separate, so no one person has control of all financial decisions. Don’t give up your financial responsibilities to any employee. For example, avoid having an employee control all check-writing.
Also, let employees know you are watching.
Contact Titan Alarm for your business security needs
As a leading commercial security solutions provider in the Phoenix area, Titan Alarm can help you design and implement a state-of-the-art security system that can help to prevent fraud and other threats to your business. Contact us to schedule a no-obligation consultation today.