“SCCA is a dynamic organization that is responsive to the business community.”
SCCA Member: Suzanne Weinstein, Coastal Seafoods

6 Simple Tips to Protect Yourself from Fraud

Employee theft and fraud in small businesses has become a serious issue that can have long lasting consequences. In 2010, the average loss caused by fraudulent activity in small businesses was $150,000 [1], and it often lasted an average of 18 months before it was finally detected [2].

To coincide with May’s SCCA membership meeting on Fraud, we have provided a list that was compiled by the Small Business Association of 6 simple tips for small businesses to help prevent fraud in the workplace. If you are interested in learning more tips about fraud prevention, ways to protect yourself from fraud, as well as commonly used fraud schemes, then please join us this Wednesday, May 16th, at our monthly SCCA meetings. It will be held at US Bank from 11:45AM to 1:00PM. Food will be provided by the Birchwood Café.

1. Use Pre-Employment Background Checks Wisely

One of the first steps to preventing fraudulent employee behavior is to make the right hiring decision. Basic pre-employment background checks are a good business practice for any employer, especially for those employees who will be handling cash, high-value merchandise, or have access to sensitive customer or financial data.

It’s worth noting, that the law varies from state to state on whether a private employer can consider an applicant’s criminal history in making hiring decisions. Check with your state laws in your area before going down this path.

2. Check Candidate References

It’s good practice to check references, particularly those of former employers or supervisors. If your candidate has a history of fraudulent behavior, then you’ll want to know about it, before you hand them a job offer.

3. Proactively Communicate Conduct Guidelines

Every business needs an employee code of ethics and conduct – while it won’t prevent criminal or fraudulent behavior, the standards it outlines will set a clear benchmark for employee behavior and guidelines on how to do business based on a series of principles that promote ethical and lawful conduct.

4. Don’t be Afraid to Audit

Conducting regular audits can help you detect theft and fraud. Audits can also be a significant deterrent to fraud or criminal activity because many perpetrators of workplace fraud seize opportunity where weak internal controls exist.

Identify high risk areas for your business and audit for violations on a 6-12 month basis – these could include business expense reports, cash and sales reconciliation, vacation and sick day reports, violations of email/social media or Web-use policies, and so on.

5. Recognize the Signs

Studies show that perpetrators of workplace crime or fraud do so because they are either under pressure, feel under-appreciated, or perceive that management behavior is unethical or unfair, and rationalize their behavior based on the fact that they feel they are owed something or deserve it.

Some of the potential red flags to look out for include:

  • Not taking vacations – many violations are discovered while the perpetrator is on vacation
  • Being overly-protective or exclusive about their workspace
  • Prefers to be unsupervised by working after hours or taking work home
  • Financial records sometimes disappearing
  • Unexplained debt
  • Unexpected change in behavior

6. Set the Right Management Tone

One of the best techniques for preventing and combating employee theft or fraud is to create and communicate a business climate that shows that you take it seriously. Here are some simple steps you can take to keep your finger on the pulse:

  • Reconcile statements on regular basis for fraudulent activity
  • Hold regular one-on-one review meetings with employees
  • Offer to assist employees who are experiencing stress or difficult times
  • Encourage open-door policies giving employees the opportunity to speak freely and share their concerns about potential violations
  • Create strong internal controls
  • Require employees to take vacations
  • Treat unusual transactions with suspicion
  • Trust your instincts                                                                                                      [3]


To RSVP for the May meeting, click on the Eventbrite link below.

Eventbrite - SCCA Membership Meeting - May 2012


[1] http://www.avertifraudsolutions.com/identifying-fraud/fraud-statistics/

[2] http://www.acfe.com/rttn-highlights.aspx

[3] http://www.sba.gov


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