Safeguarding Your Business

The fraudulent activities of employees are a major cause of loss in the business community. Poor business practices and a lack of supervision create an environment for dishonest employees to use a variety of methods to steal from their employers. The two main areas of risk are:

  • cash handling procedures
  • purchases and accounts payable

Did you know
the tell-tale signs of fraudulent activity are usually the obvious ones!

Cash Handling Procedures

Why does it happen?
The main risks involved in cash handling procedures include:

  • theft
  • misuse of petty cash
  • submitting fraudulent claims

Poor cash handling and reconciliation practices are the main causes of this type of fraud.

Keeping large amounts of cash on the premises and not securing them or banking them promptly also creates opportunities for theft.

Other factors include:

  • using common registers, drawers and lockers among staff
  • paying claims without appropriate authorisation or receipts
  • not supplying details of purchases on claims

What you can do?
Make sure you have good cash storage facilities and regularly review your banking procedures.

It's important to train staff on cash handling procedures and regularly supervise them. You can also

  • segregate duties involving cash handling
  • arrange for cashiers to operate their own float and balance when undertaking duties
  • minimise the use of an open cash register

By regularly carrying out audits for cash transactions and floats, you can identify any discrepancies. Steps you can take to do this include:

  • monitoring the number and regularity of 'No Sales' transactions on cash registers and countersign 'No Sales' transactions
  • reviewing petty cash transactions and claims
  • retaining all receipts for audit purposes

Purchases and Accounts Payable

Why does it happen?
The purchasing and supply of goods for business purposes is an area open to wasted expenditure because of

  • corrupt practices
  • kickbacks
  • false claims
  • bogus vendors
  • payment for goods not supplied
  • private purchases being made through company accounts

These types of fraudulent practices often occur because of poor supervision and training or inadequate controls, such as:

  • not reviewing claims
  • lack of documentation (such as invoices, order forms and approvals)

They might also occur because of favouring particular suppliers or through receiving inducements or kickbacks from suppliers.

What can you do?
As an employer, you can take a number of steps to safeguard your business against fraud which include:

  • authorising individuals to make purchases and payments
  • issuing guidelines and training on making purchases and payments
  • setting an expenditure limit
  • segregating purchasing, receipting and payment duties
  • monitoring compliance with policies and procedures

It's important to make sure your business has documentation supporting all transactions for expenditure and payments. This creates a paper trail for accounting purposes and highlights any discrepancies.

When making purchases and payments ensure:

  • expenditure is supported by an original invoice, order number details or original delivery docket
  • receipt of goods and services is acknowledged
  • payment on the account is made on an original invoice
  • cheques are made payable to the account of the supplier, and not to 'cash'
  • you keep payment records for audit purposes

Did you know
you can stamp out fraudulent activity by regularly carrying out audits!

Download the Employee Fraud Brochure.