Why do people steal? There is a “Fraud Triangle” that auditors refer to when considering if there might be a problem. At the top is “Opportunity” on the bottom left is “Incentives/Pressure/Motive” and the bottom right is “Rationalization/Attitude.”
The key is the two bottom issues… Incentive/Pressure/Motive and Rationalization/Attitude. An employee might have a serious need for money. They might feel like they are underpaid. Maybe they hold some religious or social grudge against you. Some do it out of a sense of “getting even” for some perceived slight or wrong.
The next step it to review if there is also opportunity. You have to think a bit here. Ask yourself questions about their duties. Is there a way they could steal from you?
There are many other forms of business theft. Such as selling trade secrets to competitors. Taking company assets for personal use, such as unauthorized use of vehicles, equipment, etc.
Some things that might tip you off that there might be a fraud problem: 1. Catch an employee telling a white lie about some business document like an expense report. 2. Hear them complaining to others about their pay. 3. They get angry with you and accuse you of being unfair, etc. 4. Your bank balance seems tight when you expected it to be larger. 5. Customers complaining that they are not getting proper credit for payments they have made to your business. 6. Vendors attaching late payment fees to your account, when you expected them to be paid on time. 7. That employee never letting anybody else reconcile your accounts. 8. That person never takes any vacation days.
Some steps a good business owner can take to reducing or even stop the risk of fraud occurring: You might breakup that employee’s other duties, powers, access points, etc. Put in security cameras. Create a program of cross training. Spend some time looking at any possible relationships with customers/clients, other employees, etc. that might go beyond what you would expect to find. Reassign certain tasks to others that would help reduce the chance of fraud occurring. Do some unannounced spot checks of their work product. Create a system of other employees checking each other’s work product and submitting a signed report that they did that. Have employees train a backup and enforce everybody taking annual vacations.
The list could go on and on. Be creative and proactive, don’t make the mistake of just assuming it won’t happen to you.
Did you hear? Job 34:3 says, “For the ear tests words as the palate tastes food.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.