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Five steps in fraud prevention

Fraud Prevention

Small businesses are at a higher risk of fraud than large companies due to lack of internal controls.
According to the 2014 Report to the Nation on Occupational Fraud and Abuse (copyright 2014 by the Association of Certified Fraud Examiners, Inc.), the typical organization loses 5% of its annual revenue to employee fraud. The fraud cases studied in the ACFE 2014 Report showed that the fraudulent activities studied lasted an average of 18 months before being detected.

Below are five steps that can be taken in fraud prevention:

  1. Implement a reporting system
    Train your employees on how to identify the signs of fraud. Some employees may be too nervous to report suspicious activity to management, so consider setting up an anonymous reporting system.
  2. Deploy internal controls
    Setting up in-house systems like Sage Alerts and Workflow can keep you in the know by notifying you when things are not as they should be. Having these automatic alerts can bring immediate attention to situations that will not only minimize fraud, but mistakes on a whole.
  3. Separation of duties
    The underlying theory of separation of duties is that a single employee should not be in a position to both commit and then conceal fraudulent activities. In general, the flow of internal processes should be designed in such a manner that one individual’s roles and responsibilities serve, in part, as a check and balance of another individual’s work.
  4. Reconciliation of bank accounts
    Bank reconciliations provide insight into the differences between an organization’s cash balance per the balance sheet and per the bank statement, while also proving the completeness and accuracy of the data recorded in the organization’s cash ledger. Adequate separation of duties should also be implemented in the bank reconciliation process, in that the cash bookkeeping, bank reconciliation and check signer functions should be separated. 
  5. Outsourcing to Audit Professionals
    Having the eyes of independent audit professionals verifying your numbers eliminates dishonesty due to friendships, and favoritism or the fear of retaliation.

For more information on ways and tools to help protect your company against fraud, contact us.

(516) 867-6752 or

IDT Team

Integrated Data Technology is a leading solution provider in New York. Specializing in Business Management and ERP solutions, we identify key technologies and their impact on present and future business practices to help improve our clients productivity and profitability.

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