Employee fraud can be a difficult topic for any company to tackle. After all, there’s an inherent trust placed in the people you employ — and oftentimes you like them, too. The idea that a trusted team member might take advantage can feel like a personal affront. The truth is, however, employee fraud is fairly common. At BCH, our risk management experts encourage an all-encompassing approach to protecting one’s business — and that includes making sure employees are operating as they should. Read on to learn about the most common forms of employee fraud, warning signs to watch out for — and how you can protect your business.
Understanding and Identifying Common Types of Employee Fraud
It’s estimated that the typical organization loses about 5% of its annual revenue due to employee fraud — and that fraud can take a variety of forms. Here are a few of the most common:
- Embezzlement: Theft or inappropriate use of company funds, often accomplished through fraudulent billing.
- Theft of Product: Taking without permission company products, supplies and related items — or providing unauthorized discounts to oneself or others.
- Theft of Data or Intellectual Property: Accessing important company or customer information, either to sell or for personal gain.
- Time Theft: Arriving late, leaving early, using company time to tackle personal errands and otherwise wasting hours on the clock.
- Workers’ Compensation Fraud: Fabrication or exaggeration of an injury incurred on the job with the hopes of financial gain.
BCH Tip: Our Employee Theft Overview Sheet digs into the devastating blow such acts can have on a company and offers tips you can put to good use. Download your copy here!
Taking Steps to Stop Employee Fraud in its Tracks
It can feel overwhelming — impossible, even — to keep an adequate eye on one’s team members, especially if a company is on the larger side. With a bit of added vigilance and the right systems in place, however, you can keep your company better protected. Here are a few suggestions:
- Implement Regular Reviews: From financial statements, to hours billed and even reviews of who has — and hasn’t — taken advantage of company holidays, it helps to stay in the loop. In addition to those planned-out monthly or quarterly lookovers, add random audits by a neutral and qualified third party into the mix.
- Communicate Openly and Honestly: Let employees know in no uncertain terms that fraud will not be tolerated, and that you have measures in place to spot and stop such acts.
- Divide Up the Financial Work: Trusting one individual implicitly with your company’s finances can be a recipe for trouble. No one person should have complete and total access to your money and the records associated with it.
- Train Team Members to Know What to Watch for: From numbers that simply don’t add up, to employees acting a bit “off,” there are a few telltale signs that fraud might be taking place. Educate managers, supervisors and other team members not only about such warning signs, but also about what to do if something seems suspicious.
- Keep the Right Coverage in Place: Every company is at risk of employee fraud in some way, shape or form. Proper business insurance coverage can help you recover losses and get back on track following such an event.
BCH Tip: Our Employee Fraud Fact Sheet offers even more great advice to keep your company protected. Download your copy here!
Of course, the majority of workers are inherently honest, but it’s always best to be on the lookout. (That includes keeping an eye for unemployment fraud, as well.) If you have questions on any of the above, or if you’d like to speak with a professional about making sure your risk management plans and business insurance are where they should be, feel free to contact BCH. Our experts are always glad to help.