Fraud prevention is an important part of protecting any business. A business is an investment, and without safeguards to protect it, the business is vulnerable to criminal activity that could, potentially, ruin it. For this reason, fraud prevention is a crucial part of any business model.
The first and most important step to prevent fraud is to know who you are working with. Employee references must be checked; without having positive feedback from reliable references you should not trust any employee with your business, with your investment.
To prevent fraud, the business must establish a clear understanding of what is and what is not acceptable. Each employee needs to be explicitly told the rules; the business must not allow for any gray areas when it comes to policy and procedures. Not only will this make it easier to detect criminal activity, it will also prevent accidental mistakes from being made. If every employee is comfortable with what the company expects of them, they will be less likely to make a mistake and less likely to try to hide criminal activity from other employees.
There are many ways to commit fraud in accounting, and one of the ways to prevent it from happening is to implement procedures that will make it easier to detect dishonest activity. For example, use checks numbered sequentially so that each check can be accounted for. Enforce procedures that involve more than one employee being present, such as when a deposit is made or when money is counted.
In addition to this, secure and sensitive documents, such as payroll and bank statements, should be controlled. This will help keep important financial information from falling into the wrong hands. You may consider getting a separate post office box or address for sensitive documents, which would help limit the amount of people who have access to them.
To further prevent fraud in your accounting department, the work of the select people who handle secure and sensitive documents should be reviewed by a third party. This third party should not have an investment in the work in question and should be able to spot any mistakes, whether they are accidental or warning signs of fraud. An effective way of doing this is to hire an accountant. This will safeguard your business by not only bringing in a third party, but by bringing in a third party that has experience and knowledge that will protect your business.
Regardless of how you choose to protect your investment, make sure that fraud prevention is a key concern when drafting your policies and procedures.