Stopping Employee Fraud
Profit Ability Article Highlight

Payroll fraud can affect any company, no matter the size. What is most insidious about this sort of crime is that it is so hard to detect. Employees can poach hundreds to tens of thousands of dollars without anyone even noticing. In one case, we heard of one payroll manager actually purchasing her $30,000 car using company funds and the company not discovering this for over two years. Moreover, prosecuting such a crime, even when detected, can be quite onerous for the company. So how does a company stop it in the first place? Read on for more.

First, it is important to begin with the notion that any employee, no matter how long he or she has been with the company or how seemingly trustworthy, can defraud the company. This does not mean you need to treat everyone like a suspect; just don't be caught off guard by anyone. Also, remember that family members working in the company can also commit fraud. Sadly, this happens more than you might think. Another key is to remember that an ounce of prevention is worth a pound of cure. Policies and procedures really do matter in the fight against fraud, so do not overlook them or implement them haphazardly. Lastly, remember that people who commit fraud are both motivated and creative. So don't just implement standard fraud prevention techniques without taking account of loopholes and weak spots inherent to your firm. Quite often victims of fraud admit after the incident that just asking questions like those listed here would have "opened their eyes" to the crime taking place. So read on. If you find yourself answering "yes" to many of these questions, you may want to give us a call.

Questions to ask as you consider your employee fraud risk:

• Does any employee have an inordinately close association with suppliers or vendors?
• Is there an absence of explicit personnel policies in our company?
• Are there invoices showing up without explicit detail on what was delivered?
• Is your new accounts payable staffer walking around the office graced in a mink coat? (just kidding)
• Are there people working at the company who are related to each other?
• Are your company's auditors, banks or attorneys bringing suspicious evidence to you?
• Are there large year-end transactions taking place?
• Are there transactions taking place that do not fall on a standard day or cycle?
• Do you find hand-written IOUs from the CFO to the company? (just kidding here too)
• Are there inordinate numbers of transactions taking place at one time or during one shift?
• Is one person handling the bulk of payables or receivables?
• Are you paying invoices on copies of invoices rather than originals?
• Is there a lack of mandated vacations, periodic rotations, or transfers of key employees?
• Is your entire a/p department driving around in new BMWs? (just kidding here once more)
• Is there a particular employee with access to company funds who rarely or never takes a vacation?

If you have further questions on this issue, please contact our offices.