It is estimated that most businesses lose about 6% of their revenue through employee and customer fraud. Facing losses that great makes it no surprise that many small businesses are struggling to stay afloat. Here are a few tips from security professionals on reducing the amount of loss in your business:
- Follow recommended internal control protocol. The International Accounting Standards Board (IASB) has created a list of internal controls that a business should follow to prevent fraud. One of the key internal controls recommended by IASB is segregation of duties. This means that you should have separate employees manage your cash register, keep income records, and make deposits. If a single employee is responsible for both receiving cash and depositing it, there isn’t anything stopping them from pocketing it and reporting lower sales but their own honesty. It is also a good idea to rotate responsibilities from time to time. If an employee is concealing fraud, it will often be caught when someone else takes over their responsibilities.
- Implement electronic cash management solutions. Cash management software removes human hand in the accounting and management of cash-flow in your business. This serves two purposes– it reduces room for mistakes, and also opportunity for fraud. An electronic cash management system records all sales and the type of payment given throughout your business day. At the end of the day, you get a report of what your cash deposit should be. It is difficult to pull off any funny business when the cash deposit is closely monitored.
Cash management systems also offer protection from customer fraud. Many cash management systems include business scanners that prevent you from accepting fraudulent payment. A business scanner can serve as a counterfeit detector machine that you run higher denominations through and are alerted when the bill is fake. You are also able to electronically process cheques with a business scanner. This allows you to deposit cheques as soon as you receive them, and ensures that the cheque information is legitimate.
- Make audits a standard practice in your business. You fear that auditing your employees’ work conveys that you don’t trust them, but having a standard practice of audits makes it a routine and an issue of mistrust. Performing regular audits of your financial records will help you detect unusual activity early on, and knowing that fraud will be caught is a strong deterrent for employees who would be tempted to commit theft. It is recommended to perform audits of all areas of potential risk every 6 to 12 months. This include cash reconciliation, expense reports, invoice records, and so on.
- Focus on loss prevention. Implement a good loss prevention policy to deter shoplifters within your business. This could be as simple as educating your employees on signs of suspicious activity or posting a notice that shoplifters will be prosecuted. It is a good idea to arrange your merchandise to maximize visibility, with shorter displays by the registers and taller displays by the back, to remove secluded areas that shoplifters can conceal merchandise. You will also deter theft if you install visible security equipment throughout your store. Also, make it a policy to greet customers and periodically ask if they need assistance; this is both a good customer service practice and lets potential shoplifters know that they are noticed.
Do you have any recommendations for fraud prevention that we didn’t mention? We would like to hear your suggestions. Please leave a comment below!