Employee dishonesty losses can take a heavy financial toll on a business if left unchecked. The Association of Certified Fraud Examiners estimates that businesses lose $400 billion (6% of their total revenue) per year through fraud, theft and embezzlement, attesting to this ever-growing problem.
According to a study published in the Journal of Economic Crime Management, payables fraud was the most common type of employee dishonesty loss reported by U.S. companies (source). This catch-all term is used to describe any fraudulent activity involving accounts payable employees. For instance, an employee may write a company check to a bogus, non-existent supplier, only to pick it up and cash it a later time. Employers are often too busy to monitor each and every transaction that takes place within their organization, so instances of payable fraud go unnoticed. In fact, the average dishonesty scheme lasts approximately 1-2 years before it’s discovered.
Other forms of employee dishonesty losses include direct theft, paying for personal expenses using a company credit card, sending benefit checks to friends or family members who are not entitled to them, and falsifying records for monetary gain.
The study’s researchers also notes that rates of employee dishonesty have increased over the past 15 years. “As identified by the respondents in this national survey of risk managers on crime, employee dishonesty is a major problem that has increased since corporate dishonesty created havoc in the U. S. capital markets beginning in January 2000, and is increasing annually,” wrote researchers.
Tips To Prevent Employee Dishonesty Losses:
Install video surveillance systems to monitor both shoppers and employees.
Consider investing in employee dishonesty insurance.
When employee dishonesty occurs, gather evidence and proceed forward with prosecution to deter future instances.
Carefully look over invoices for double-billing and other unusual activity.
Perform background checks on job applications and existing employees.
Of all of the tips mentioned above, the single most important tip for preventing employee dishonesty losses is to screen job candidates using a reputable background screening service. Just because a candidate has all of the right answers during a job interview doesn’t necessarily mean they are the best choice for the position. They may have a long criminal record consisting of numerous theft and/or fraud charges, which further increases the risk dishonesty charges. The bottom line is that employers should screen all of their job candidates to mitigate their risk and promote a positive working environment.
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