When we talk about fraud and embezzlement in business, famous criminals like Bernie Madoff and Jordan Belfort might come to mind. But it isn’t just banks and institutions on Wall Street that deal with financial fraud.
Every business owner must understand the dangers of embezzlement and the implications it could have on their organization. Smaller organizations are especially at risk because they often lack the resources to take a financial loss. Plus, many small businesses only require one employee to manage financial information and documentation, making it easier for that person to commit fraud because there’s no one to hold them accountable.
As an HR professional of any corporation (large or small), you can reduce the risk of fraud by following a few simple steps.
Step 1: Require Employees to Take Vacation
There are numerous arguments in favor of giving employees ample vacation time. Taking time off allows employees to step back and reflect on priorities, reducing burnout and improving overall productivity. Another benefit to vacation time? It keeps crime down. Fraud and Ethics consultant Kelly Paxton says an employee who skips vacations might raise suspicions, so requiring your employees to take a vacation every year can help you ensure employees are abiding by the law at all times.
Many banks and financial institutions have already implemented a mandatory vacation policy. Employees must leave their laptop at the office and escape the 9-to-5 grind for a week or two every year. And even if you think you can trust your employees, this can help you identify suspicious behavior. It's good for everyone to get out of the office once in a while, but it's especially important for people with fiduciary responsibilities to leave work behind so that you can ensure your business is not at risk of fraud.
Step 2: Implement Background Checks
Many HR professionals hire candidates they know personally, or those who have been referred by a current employee. According to a PayScale report, over a third of U.S. workers got their job through a referral from a current employee. When you know someone, you may not think to run a background check. But at the very least, you should plan to conduct a credit check on any employee who has access to your business finances (or will at some point in the future). An employee who is deep in debt is more likely to embezzle money, especially if that debt is sudden or unanticipated.
Step 3: Cross-Train Your Employees
If you work for a small company, chances are each department at your organization is fairly nimble, and you may even be tight on resources. But no one should be the only person who knows how to do basic tasks in their given department. More than one person should know how to cut a check, and multiple people should have passwords to financial systems. This doesn't just lower your risk of crime; it helps you plan and prepare for succession, and enables successful business continuity should someone quit unexpectedly.
Taking these simple steps can lower your financial risks, keep your employees happy and solve business problems. And if you ask me, that’s a pretty good deal.
Photo: Creative Commons