No business owner likes to think about the possibility of their employees stealing from them but it can happen. Even though the majority of the people that you hire will be perfectly honest, loyal people, employee fraud is more common than you think.

On average, an organization loses around 5 percent of their revenue to fraud and often, the employees that commit fraud have a clean employment history, so you can’t always spot the perpetrator right away. Employee fraud also tends to go unnoticed for a long while as people will only take small amounts that build up over the years. If you don’t spot fraud and deal with it, you could lose some serious amounts of money.

Protecting yourself from fraud is particularly important if you are a small business because you won’t have as many resources available to detect and prevent fraud and you also don’t have a very big financial cushion, which means that any loss is going to hurt you a lot more than it would a big business. If you haven’t put much thought into it before, these are some of the best ways to protect your business from employee fraud.

Create a Positive Company Culture

Some people are just dishonest and they will steal from the company no matter what. However, a lot of fraudsters are opportunists and they don’t start working for your company with the intention of stealing from you. Somewhere along the line, they spot an opportunity to steal money without being detected easily and they decide to take it, usually because they are not happy with the way that they are being treated at the company. Disgruntled employees are always far more likely to steal from you when the opportunity presents itself, which is why it’s important that you create a positive company culture. If people feel that they are being treated well and they are respected, they will be more invested in the success of the business and they will not be as likely to steal from it.

A positive company culture will also help to detect fraud. Most perpetrators of employee fraud are caught because a coworker informs the business owner of what is going on. In a company that is filled with unhappy employees, people are far more likely to turn a blind eye if they find out that a coworker is stealing. But if you create a positive environment and keep your employees happy, they are far more likely to act and let somebody know if fraud is being committed.

Paying people properly is a big part of creating this positive culture. If people feel that they are not valued and their pay doesn’t reflect the value that they bring to the business, they will feel that they are owed something. Some people will decide to take what they feel entitled to by stealing from the business. This is especially true of long standing employees that have not been given a pay increase, regardless of their dedication and value to the business. Paying people fairly will keep them motivated and happy, and reduce the chances of them attempting to commit fraud against your business.

Check People Before Hiring

This is by no means a foolproof way of stopping employee fraud because, as mentioned before, a lot of the perpetrators have a clean record and it’s their first offense. However, you should still be careful about who you hire because there are some warning signs to watch out for when conducting background checks. Obviously, the first thing to look out for is any sign of fraud or misconduct at past jobs. That’s a big red flag and if you find anything of that sort, you shouldn’t hire that person.

Even if you can’t find evidence of criminal activity in their past, you should still be on the lookout for things that suggest they might not be a very loyal employee. If they move around jobs a lot and don’t stay at one company for very long, you should ask them to explain that. It might be the case that they were moving for a pay increase or a promotion, in which case, you don’t need to worry as much. But if they were moving around often and taking similar jobs, that’s a cause for concern. It doesn’t necessarily mean that they’re going to commit fraud but it does suggest that they are not very loyal to the people that they work for, which is a risk.

Get the Right Insurance

There is no way to guarantee that your business won’t fall victim to employee fraud, regardless of the measures that you take to reduce the chances of that happening. That’s why it’s important that you are protected if it does happen, so you need to get the right insurance. It’s best to speak with a company like Krywolt Business Insurance and have them compare some policies for you. They will help you to find the right policy that gives you the protection that you need against employee fraud. If you don’t have any insurance to cover you and you are the victim of fraud, it could cause you some serious financial problems and it may even force you to close the business entirely.

Establish a Clear Code of Conduct

Sometimes, clearly communicating the consequences of stealing from the company is enough to deter people from doing it in the first place. If you let people know that they will be fired on the spot if they are found to be committing fraud of any kind against the business, they will be less likely to do it. This is especially true in cases where employees are taking goods from the business because they don’t always realize the seriousness of their actions. It usually starts with something small like stationary and over time, they gradually start increasing the value of the things that they are taking from the business. While they understand that it is wrong, they might not always consider it fraud and may not understand that it is a sackable offense.

That’s why it’s important to have a clear code of conduct that outlines all of the different types of employee fraud and what the penalties for them are. You should communicate this code of conduct to employees when you hire them so they know exactly what the consequences will be if they attempt to steal from the company. Letting people know that you have a zero tolerance attitude is a good deterrent here.

Implement Security Procedures

When it comes to handling financial transactions of any kind, it’s so important that you have the right procedures in place to prevent fraud. If, for example, one person is left alone to count cash and report takings for the day before putting it in the safe, you’re opening yourself up to fraud. It’s so easy for them to pocket a bit of the money and nobody would ever know. But if you have a clear procedure that states all cash must be counted separately by two people and all amounts recorded, it’s harder for people to get away with stealing. There is still a chance that both employees would work together to commit fraud, but it’s not very likely.

This is just one example of how companies use procedures to prevent fraud, and you need to ensure that you have them in place wherever money is concerned. As a general rule, you should not give one single person full responsibility over a financial transaction. If you split those financial duties and always have two or more people checking a transaction, it is a lot harder for somebody to steal money.

Automating things and taking control away from employees is another great way to reduce fraud. For example, if you implement accounting software that automatically records most of your financial transactions, it’s a lot harder for a dishonest accountant to make alterations and skim money off the top.

Watch Employees Closely

When people talk about employee fraud, they often picture sophisticated criminals coming up with genius plans to take money from the company without anybody realizing but the reality is a lot different. Usually, these are people that saw an opportunity and took it, there isn’t a huge amount of thought that goes into it and most of the time, they don’t really know what they’re doing, and that makes them nervous. That’s why you should always keep an eye on your employees and look out for any odd behavior in the workplace.

If somebody suddenly starts staying late when they wouldn’t normally, that could be a bad sign. Maybe they’re just trying to catch up on work but they may also be trying to get some time alone in the office so they can steal. If people start avoiding you a lot, that might be because they’re feeling guilty. In general, any change in an employee’s behaviour could be a cause for concern.

As long as you take steps to protect yourself from employee fraud, it shouldn’t be a problem. But the worst thing that you can do is pretend that it isn’t a possibility because regardless of how much you think your employees like you, there is always the chance that they will try to steal from you.