We all know Smokey the Bear’s slogan. “Remember – only you can prevent forest fires.” You can use the same slogan for fraud: only you can prevent fraud in your company.
I couldn’t let National Fraud Awareness Month slip by without mentioning a major contributor to revenue loss for a company. In its 2016 Global Fraud Study, the Association of Certified Fraud Examiners (ACFE) reported that a typical organization loses 5% of its revenue in a given year as a result of fraud.
Let that sink in a minute – 5% of your total revenue. Billing schemes and check tampering pose the greatest risk. And here’s another thing to think about, the perpetrator’s level of authority is strongly correlated with the size of the fraud. The higher up the thief, the bigger the theft.
I have written extensively about fraud as it can severely damage a company, and can even cause it to fail. While you can’t prevent fraud 100 percent, you can lessen its effect on your business. Does your company have strong enough fraud prevention measures in place? Here are a few articles to get you started.
Best friends, grandmothers, partners, even church ladies – I’ve seen them all commit fraud. When it comes to protecting your assets, trust no one. Don’t ever think that you know someone well enough to say, “He would never do that.” Maybe not. But don’t find out the hard way.
Sadly, the same goes for family members. Just read about the sad case of Gladys Knight and her son and what he did to her poor chicken and waffles restaurants.
I once worked with a company where the younger brother was running the business and took a salary beyond the limits allowed by the corporate minutes. Unfortunately, the fraud was only discovered after Daddy died and the statute of limitations had run out.
Fraud can occur when you have three elements: pressure, opportunity and rationalization. Knowledge of the fraud triangle is the basis of any successful fraud-deterrence program.
To catch fraud early, you need to know what the red flags are. One of these is when an employee exhibits behavioral changes, undergoes a sudden change in lifestyle or has financial difficulties. Read the article for four other red flags you need to be on the alert for.
According to the ACFE, the most common way internal fraud is detected is by receiving a tip from someone. One of the things your company can do is set up an anonymous hotline for anyone to report suspected theft. Their numbers show that organizations that had one were much more likely to detect fraud than those that didn’t – 45.3% to 28.2%.
My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.