The COVID-19 pandemic has been hard on everyone, businesses, and employees alike. As vaccinations continue to roll out and life slowly returns to normal, you may be taking a fresh look at your business. As you rebuild better than ever, you want to make sure you do everything you can to protect your business from further harm.

Business fraud is one of the biggest risks facing entrepreneurs as we emerge from the pandemic. Read on to learn more about this problem and how you can avoid it in your own company.

What Is Business Fraud?

Before we dive into all the things you can do to prevent business fraud, let’s talk some about what it is. Business fraud occurs when an employee or business owner misuses company resources for their own gain. The three primary types of business fraud include asset misappropriation, corruption, and financial statement fraud. 

Asset misappropriation is when employees take company money or assets. Financial statement fraud involves intentionally omitting or falsifying information in the company’s financial reports to create fake revenue, inflated assets, and so on. Corruption schemes involve an employee or manager engaging in bribery, extortion, conflicts of interest, and so on.

Engage with Your Employees 

One of the best ways to prevent fraud in your organization is to engage with your employees as much as possible. Talk to them, get to know them, and ask them questions about themselves. Let them know you have an open-door policy and pay attention to how they interact at your company.

When an employee starts committing fraud, there will likely be some sort of indication in their behavior. A previously outgoing employee might become withdrawn, or someone who never missed a day of work might start having absences. When you know your employees well, you can spot these changes and figure out the reasons behind them.

Set Up a Reporting System

Aside from focusing on engaging with your employees, it’s also a good idea to set up a reporting system. You’re likely not the first person who will notice if an employee starts committing fraud. People who work with that person or even in other departments are likely to notice changes or the employee may even confide in them what they’re doing. 

Make sure your employees all know the signs of fraud and that they know what to do if they see it happening. Have an established procedure for reporting these incidents, preferably anonymously. If employees feel secure and confident reporting fraud, they’re more likely to do so—saving you a lot of money. 

Put in Internal Controls

Relying on your employees to report fraud when they see it is wonderful, but it can’t be your only safeguard against business fraud. You also need to have internal systems set up that help to catch fraudulent activity and alert you so you can take the appropriate action. Not only will this help you to catch fraud if it does happen, but having these systems in place can help to discourage anyone who might be considering committing fraud.

Set up systems of checks that keep multiple people involved in financial matters and documentation. For instance, have two different people tally cash register receipts and make the deposit in the bank. It’s also a good idea to require two signatures on incoming checks and to double-check the legitimacy of any new vendors with your company. 

Rotate Employees 

In addition to setting up a reporting system and internal prevention measures, you may also want to consider rotating employees through different jobs. When one employee works the same job by themselves, it’s easy to hide any fraud they may be committing. But when different employees work different jobs every day, it gets harder to cover those tracks.

Of course, the feasibility of this option depends a lot on your company setup. You obviously can’t move around employees who have expertise in one area. You can set up systems of checks within these systems that make it harder for employees to hide wrongdoing.

However, if you run a retail store or similar, rotate employees through working the cash register, tidying displays, and managing the stock room.

Promote a Positive Work Environment

One of the best things you can do to prevent fraud in your company is to promote a positive work environment. This may sound odd, but remember, fraud is, at its core, an employee harming the company to promote their own gain. If none of your employees have motivation to harm your company, you won’t have to worry as much about fraud. 

Make sure your employees are paid fairly and provide them with the best benefits you reasonably can. Listen to complaints and concerns when they arise and make sure that, while your company has monitoring systems, employees don’t feel harassed. Do what you can to help employees who are dealing with challenges in their personal lives, and make sure to recognize a job well done. 

Prevent Business Fraud

Business fraud is a huge risk for any business owner, but with the proper precautions, you can avoid it. Make sure you get to know your employees and set up a system for them to report fraud when they see it. Put internal safety measures in place, rotate employees among jobs, and do your best to create a positive work environment. 

If you’d like to learn more about business fraud, check out the rest of our site at Gallagher Basset. We guide, guard, and go beyond in helping you get the protection you need. Contact us today and discover the world of possibilities we offer to help you improve your insurance claims experience.