I Spy ... Dealing With Fraud In Your Business 


“We couldn’t believe it when we found out it was John. Thousands of dollars of inventory gone and he was the last person we would have suspected. He seemed so honest and reliable – we didn’t even think he needed supervision because he was so professional and diligent. We thought we could trust him. How wrong we were.”

Don’t think this could ever happen to you? Think again.

Employee theft is, unfortunately, commonplace in all too many businesses. In fact even apparently minor pilfering of office stationery and stores, making colour photocopies on the office printer, and ‘borrowing’ software for home use, could be costing you real money right now or putting you at legal risk.

In Australia the findings of a nationwide survey conducted by the Australian Institute of Criminology and the council of Small Business Organisations of Australia (COSBOA), and based on the responses of just over 4,315 businesses spanning the retail food, retail liquor, newsagent, pharmacy and service station sectors, recorded small businesses as losing an estimated $3.2 billion a year due to crime - with employee theft being among the top 4 contributors. InNew Zealand the story is similar – employees are a significant contributor blamed for 26% of the total value of retail shrinkage.

These staggering figures indicate that most businesses are just not dealing with the potential for fraud and misuse of business resources effectively. All too often significant funds, assets and resources will have vanished before anyone cottons on - and the offender will often leave the company before being caught.

But it doesn’t have to be like this. A well designed loss prevention programme can help identify potential fraudsters even during the hiring process and will also allow you to detect attempts at fraud or theft in your business before it gets out of hand.

Ten tips to help make your business theft proof

      1.    Minimise the risk of hiring a pilferer in the first place. Do thorough background checks on new team
             members and ensure you speak to former employers for a character reference. Checking conviction
             records through a private detective agency can also be worthwhile for some particularly at risk
             positions, but keep in mind that there are laws governing this practice, such as anti-discrimination and
             privacy laws. Make sure you consult with a legal professional before you attempt any checking of

      2.    Make sure no financial transaction is handled from beginning to end by only one person. Separate the
             accounts receivable and payable functions either internally or by outsourcing some of your accounting

      3.    Keep your accounts up-to-date. Regular reconciliation makes it easier to detect fraud.

      4.    Conduct regular physical inventories. Once a year is not enough – reconcile stock with sales at least
             quarterly and involve an outside auditor.  Occasionally do an unscheduled check.

      5.    Limit the number of people who have the authority to sign company cheques. Requiring two
             signatories is a real safeguard.

      6.    Ask for bank statements to be sent to you personally. Check the statement for any irregularities before 
             giving it to your internal accounts team.

      7.   Watch your cash register records. An excess of no sale or void actions indicates you could have a

      8.   Guard your petty cash. Have a ‘no receipt, no refund policy’ for all purchases made by team members.

      9.   Be suspicious if team members refuse to take a holiday. This could indicate they are worried about being
            caught out in their absence.

     10.  Institute an anonymous, off-site theft alert programme so that your team members have an avenue
            through which they can report suspected fraud or theft. 

Put in place these simple procedures and you’ll go a long way toward preventing fraud and pilfering in your business.

Until next week,
Mike Reddy