You may think that it can’t happen to your company. But you may want to think again.

In fact, according to the Global Fraud Study conducted by the Association of Certified Fraud Examiners, on average, American businesses lose 7% of their annual revenue due to internal fraud. Small businesses are especially susceptible to fraud because they typically have fewer internal controls in place and fewer employees keeping an eye on the books.

What’s worse is that the biggest perpetrators are generally the most trusted employees — people with access to company credit cards, pre-signed checks, and confidential financial data.

So if you’re a small business, what can you do to protect your company from employee fraud? Here are some safeguards to consider:

Safeguard #1: Segregate accounting duties.

This means assigning accounting functions between multiple employees. If you’re a smaller company with only one accounting person, than the owner should take a more hands-on approach to accounting, including signing all checks, inspecting invoices, and reviewing credit card statements.

Safeguard #2: Check inventory.

If you are company with inventory, then you need to have a system of checks and balances in place. For instance, hire a third party vendor or tap an employee that works outside the departments handling inventory to conduct random inventory counts.

Safeguard #3: Conduct fraud awareness training.

Be clear with employees that your company has zero tolerance for employee theft of any sort. Educate your employees on the cost of fraud and how it can directly impact their financial future.

Safeguard #4: Develop a whistleblower policy.

Many times, co-workers are the ones to reveal instances of fraud; but sometimes they are hesitant to do so out of fear of retaliation. So set up a system in which employees can report theft or fraud anonymously.

Safeguard #5: Set a good example.

If managers are taking extra long lunches and going out on the company dime to expensive restaurants, then they are creating a culture where spending company money on luxury items is perceived as normal.

Safeguard #6: Look for signs of stress.

Monitoring behavior is important to detecting employees who could be susceptible to committing fraud. So be alert to employees who seem stressed out or disgruntled, or those who have indicated that they are having financial difficulties.

Safeguard #7: Use rigorous screening processes when hiring.

One of the best ways to prevent employee fraud is to hire honest employees in the first place. When you hire, use tools such as background checks, references, and verifications of past employment and education. You can also run credit checks on candidates (with their consent) as individuals with financial difficulties are more prone to fraud.

And if you need help optimizing your hiring process, let us know. As one of the top staffing services firms in Houston, Texas, we know where to look to find talented candidates. We also know how to properly screen, interview, test, and verify so you don’t make a hiring mistake. Contact us today to get started.