HomeProductsAccountingHow Fraud Prevention is Significant in Business Management

How Fraud Prevention is Significant in Business Management

With many employees found cheating their employers, one needs to put necessary practices to avoid that. And one way of stopping a financial crisis in your company is by obstructing embezzlement by your employees. Therefore, it is significant for you to put in place practices that help your company with fraud prevention.

What is fraud prevention?

It is a strategy applied to detect fraudulent transactions and prevent these actions from causing financial and reputational damage to the customer and financial institution.

6 ways of fraud prevention in your company

One needs to have a swindling avoidance plan in place. The fraud cases in the ACFE 2020 Report revealed that the USA had 16% of government-related fraud cases in 2020. The median duration of the fraud scheme was 19 months, and the median age of the fraudster was 45 years old. Imagine if it was your company that suffered that type of loss as a result of your employees committing fraud for 570 days. Luckily, there are ways you can minimize fraud occurrences by implementing different procedures and controls.

1. Knowing your employees

In the first place, you need to have a deep understanding of your workers. As an employer, you must engage your employees to know their daily life difficulties and challenges. You should note that personal hurdles can easily lure workers to cheat their companies to solve their problems.

On the other hand, after understanding your employees’ problems, such as financial challenges, you should be part of their solutions. As an employer, you can recommend measures like giving your workers advance payments to settle their problems. And you must also ensure that benefits like insurance of employees as medical bills in most cases overwhelm workers.

2. Making your employees aware

Besides, awareness plays a vital role in a company. You must ensure that all your workers know the types of fraud and the consequences that await whoever is involved. It helps employees be aware of fraud and, they can help to tip on the management for suspicious acts in the company. It also scares workers from cheating the company as they know that their employers are aware of what takes place internally.

3. Implementing internal controls

In addition, you need to put internal controls to safeguard your company’s finances. It helps to ensure the integrity of your accounting records. And it also deters and detects fraud and theft in your company. Separation of duties is a significant component of internal control that can reduce the risk of fraud from occurring. For example, a clinic has one employee for admitting patients, one cashier, and one clinic chief physician. It helps to reveal any forgery in the collections.

4. Monitoring vacation balances

Alternatively, you need to monitor your employees whether they are taking vacation holidays or not. You have to take keen note of workers who do not go on vacation. At times such employees could be scared of finding them guilty if they went on vacation and some other worker replaced them. Therefore it is paramount to find out why some employees are not interested in going for short leaves. 

5. Hiring trustworthy experts

Furthermore, you must hire professional expatriates who can help you in detecting fraud in your company. Untrustworthy experts can easily collude with perpetrators in the company which, makes it difficult to detect fraud. They can also fail to detect fraud in the company as a result of incompetency.

6. Living a corporate culture

And lastly, you need to create a conducive working environment that can prevent an employee from cheating and stealing. You should have a clear company structure, written policies and procedures, and fair employment practices. You need an open-door policy that provides a great fraud prevention system as it gives employees open lines of communication with management.

In summary, you should lead by example and hold every employee accountable for their actions, regardless of their positions. But you cannot achieve it unless you have modern accounting systems in place. You need to adopt accounting software that can help you to detect fraud.

Interest in getting savvy tips for improving your business efficiency?

MAFABI MUTWALIBI
MAFABI MUTWALIBI
I am a student at Bina Nusantara University in the faculty of Business. I am pursuing a bachelor's degree in Business Management and Marketing. My Date and Place of birth is 22-04-1995 and Mbale City respectively. And lastly my country of origin is Uganda.

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