Corporate fraud is a growing problem in the UK, but for small and medium-sized businesses preventing fraud is proving increasingly challenging. All too often, SMEs simply don’t have the necessary resources to carry out internal checks and balances for their accounting systems. And, despite the clear advantages of fostering a culture of trust within a business, evidence shows that you’re just as likely to fall victim to internal fraud perpetrated by a long-term employee, as you are by a recent recruit or contract worker.
Recognise the risks
- External fraud: Review your business processes to ensure they’re safe from potential hijack. For example, when you’re transferring a large sum of money to a supplier, ensure the process is secure by verifying the account details from at least two separate sources.
- Payroll fraud: One of the most common types of payroll fraud is where a so-called ‘ghost’ employee is created by someone with access to payroll with the intention of diverting funds either to themselves or a third party. This ‘ghost’ employee may be entirely fictitious or a past employee who was never properly removed from the payroll system. You should also watch out for employees altering their timesheets to increase the hours they’ve worked. An employee may also ask for an advance on their salary but fail to pay it back.
- Accounting fraud: An employee might tamper with the company’s accounts to cover up theft or use the company’s accounts to commit theft. You should also look out for employees falsifying their expenses. This can include using forged receipts or double claiming for expenses. Run spot-checks on your accounts, including accounts that have been written off by the business.
- Supplier fraud: A supplier may commit fraud on their own or in collusion with someone inside your business. This might involve an employee taking a payment from a supplier in return for preferential treatment. Another example is where a supplier inflates invoices to charge the company for more goods that it provides or charges a higher price than was agreed.
- Low-level theft: No theft is too small when it comes to your bottom line and low-level theft, if allowed to continue unchecked, eventually mounts up. This could include anything from theft of petty cash to misuse of company services or resources. Also, look out for employees who are unwilling to take annual leave or are unwilling to let others get involved in their work, as this may be a sign that they fear being found out. You should consider implementing compulsory annual leave in high-risk areas of your business.
Make certain that you are adequately insured
If you discover you’ve become a victim of fraud, a comprehensive crime policy can provide essential balance sheet protection for your business. Moreover, fraud now comes in so many forms – internal, external and online - that it’s essential you get advice from an expert to make sure you’re doing all you can to protect your business.
How CLEAR can help
Our specialists can work with you to design a risk management programme supported by crime insurance to provide protection for your crime exposures. Contact Stewart Ruffles on 0207 280 3479 or Matt Harvey on 0207 280 3495.
