Using Technology to Reduce Business Fraud

Man reviewing accounting spreadsheets on computer.Five percent. That’s how much the typical organization loses to fraud each year, according to a 2016 study from the Association of Certified Fraud Examiners. For big businesses, this can mean upwards of one million gone per each event of fraud. But for small and medium businesses, the risk is even higher due to a lack of anti-fraud measures, detection and response procedures, and less oversight of staff. Read on below to understand procedures and technology to reduce fraud, and contact our commercial insurance experts to see where your business insurance falls short.

Establishing Procedures and Audits

Before you start implementing new procedures or technology, you’ll want to do two things: establish procedures for dealing with fraud and getting the resources in place for audits.

Procedures for Fraud Prevention

It’s important to get policy and procedures into place to deal with fraud from any source. For large employee pools, setting up an anonymous tip line can help discover fraud. Have an approval process for large purchases. One of the best options is to assign different financial duties (payroll, purchases, receive payments, make deposits, accounting) to different employees. The more access you give a single employee, the easier they can hide their fraud.

Information & Account Audit

There are two types of audits that should be performed. An information audit is about assessing the security of your network of hardware, software, and permissions. Along with these usually comes more procedures for password changes to improve security. The second is an audit of your accounts and accounting procedures. This is important to do before you implement new procedures to avoid existing fraud from going unnoticed.

Understanding Your Accounting Software

Technology has made balancing the books, doing payroll, and managing bank accounts much easier. The following options are available for accounting programs like QuickBooks.

  • Individual Logins: While accounting software has an “audit” function, it only tracks the logged-in Instead of having everyone go in through the Administrator account, set up accounts for each user.
  • Restrict Access: As mentioned above, it’s best to spread out financial duties among multiple employees. Restrict user access to only the sections they are assigned.
  • Close Previous Periods: Once you’re done with a period (produced a financial statement, etc.), make sure to lock that period down so additional charges can’t be hidden
  • Keep Control: Before handing bank statement or electronic payments to a bookkeeper, business owners should review who approved them. Likewise, when it comes to reconciling the bank account, do it yourself or get help from a third party.

Be Aware of Phishing and Cyber Breaches

Another concern should be fraud threats that come from outside the company. Phishing schemes pose a threat, where email or phone scammers pose as internal employees or trusted companies to get money or access to your system. Likewise, without proper cyber security, hackers could gain access to your computer and their information in a data breach (read more about them in Data Breaches: What It Could Cost You).

Insurance also plays a key role in protecting against employee dishonesty. Contact the H&K Insurance Agency today to learn more about the current coverage under your existing insurance, how to get and improve coverage, and what you can do to lower these costs.