No business owner wants to think that their employees, customers or vendors may attempt to commit fraud. However, facing the possibility that someone may perform fraudulent activities is the first step in developing an effective prevention program. By keeping a close eye on the finances, scanning the company for weak spots, performing thorough background checks and encouraging staff members to report suspicious activity, cases of fraud can be discovered early or prevented entirely.

1. Manage Finances Carefully

Neglecting to monitor the company finances can lead to a host of poor consequences. Sloppily kept books will not adequately reflect the financial state of the company and can throw off future projections and may disguise employee fraud. If the finances are not reviewed regularly, it may allow employee fraud to continue for years and require the help of a litigation support specialist to sort everything out.

2. Look for Weak Spots

Fraud can come from without or within, and the methods criminals use to target companies grow more sophisticated over time. Software systems that were previously effective at protecting company and customer information may become vulnerable to attack. Computer systems, employee behavior and everyday business processes should be audited regularly to expose any issues. Examine areas that contain sensitive information and ensure that they are properly secured.

3. Perform Background Checks

Staff members on all levels may find the opportunity to commit fraud. Conduct background checks on all potential employees during the hiring process. Contact references and ask plenty of questions about their professional conduct. Check the state and federal criminal records, the sex offender registry and any social media pages that can be found to determine a candidate’s character. Depending on the type of company, it may be a good idea to perform routine checks of existing employees in case they are attempting to conceal new criminal activity.

4. Encourage Employees to Report Issues

No matter how vigilant a business owner is, they cannot be everywhere at once. In many cases, employees may grow suspicious of a coworker or find evidence of illegal activity. If the company culture does not encourage open communication, they may feel that they should not report their findings to avoid making trouble or for fear of retribution. Managers should foster trusting relationships with their staff members so that employees on all levels feel comfortable reporting trouble.

While it may not be possible to prevent all instances of fraud, companies with good policies in place can drastically reduce any potential damage.

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