>> Read enterprise editor Helen Loveless’ blog about fraud.
>> Have you been a victim of business identity fraud? Let us know about your experiences and thoughts. What do you think the banks should do to help small businesses?
>> Email enterprise@financialmail.co.uk
If Jenkins suddenly turns up in a Ferrari but refuses to take a holiday – it just might be because he’s been cooking the books and fleecing you and he does not want you to notice what he has been up to whilst he is away.
Fraud is rocketing. The numbers we hear about, such as over £1 billion lost to fraud in the last six months, are only counting reported fraud cases big enough to warrant police and media attention. The true figure will be immeasurably higher because plenty of fraud is hushed up by employers and concerns smaller amounts.
The fraud could be on a grand scale involving third parties outside a company or someone simply inflating expenses and overtime claims. Others responsible for handling cash or payrolls could be tempted to embezzle – especially if their work is never scrutinised. However it is done, the average firm is thought to lose about 5 percent of its turnover each year to fraud and 70 percent of this goes into the pockets of its own staff.
Small companies are full of trusted staff, some of whom have been with the company for years. Sadly that does not make them immune from internal fraud.
Employment law can help with this, but only a bit. For example it is wise to include a clause prohibiting dishonesty or fraud in the employment contract and making clear it is a disciplinary offence that will likely lead to dismissal. Clear guidelines and safeguards should be handed to all staff about expenses claims and other parts of their work which are ripe for fraud.
Next use employment law to create a positive work environment. All staff should have written contracts and a clear statement of duties. Companies should stick to open and fair employment policies – the very same ones which employment laws and regulations attempt to uphold. They should also create a clear organisational structure. That way you are more likely to find loyal staff who are happy to stick to established policies and procedures.
None of this will stop a determined fraudster or even a trusted employee who has fallen on hard times or become overcome with greed.
It is wise to separate duties so an individual’s work in sensitive areas can be scrutinised by someone else and to let everyone know that regular and unannounced audits can be expected and that any irregularities will be investigated. If a company is really worried about fraud it could set up an anonymous reporting system – though this could foster an atmosphere of paranoid back biting for no reason. After all, Jenkins may have won the Lottery and just be a workaholic.
Finally no employer can afford to be lazy about following up references and checking up on the qualifications and experience on a CV.
>> Here is some more help:
http://www.cifas.org.uk/default.asp?edit_id=717-87
>> Peta Fluendy is employment law consultant at Sutton based De Brett and Co’s
http://www.iambeingfired.co.uk/
Tags: business fraud, employment law, Enterprise Zone, fraud, SMEs
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