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Employee Fraud Prevention Tips

Simple Alliance, Kenya Limited

Taming Employee Theft

The most usual form of worker stealing is embezzlement. Failure to institute the necessary controls to avert this theft puts you at risk of fraud.

Protecting your Business from Unscrupulous Staff  

You could curtail employee embezzlement by following a number of fraud prevention principles, namely:

  • Personally receiving your bank statements
  • Separating all tasks
  • Conducting yearly general or fraud audits
  • Carefully monitoring your receivables
  • Keeping your records safe
  • Understanding your business’ books
  • Closely monitoring your payroll
  • Being careful with checks
  • Sending your accountant or bookkeeper on yearly vacation

Individually getting your Bank statements

Do not allow a dishonest person the chance to eliminate evidence of wrongdoing. Every month, you or your accountant need to receive cancelled checks or unopened bank statements. This tactic will facilitate fraud detection.


Carefully examine checks elements like payees, endorsements, or signatures. 

Fraud Loopholes

Your examination needs to scrutinise the checks for fraud indicators such as:

  • Unknown payees
  • Seemingly forged signatures
  • Check amounts larger than your business’ petty cash allowance
  • Missing checks
  • Irregular check numbers
  • Checks written for third parties but endorsed by your staff
  • Check payee differing from the one in your records

Safely Keeping your Records

Ensure the safety of your accounting records by:

  • Locking up paper ledgers
  • Not allowing unofficial access to your bookkeeping software
  • Protecting the computer bearing your books as well as the bookkeeping software using a password 
  • Frequently hanging the password
  • Not including the computer bearing your books on your business’ network

Cautiously Checking your Receivables

Some receivable fraud detection caveats you could take include:

  • Obtaining back and front copies of customers’ checks
  • Ensuring customers’ checks are deposited in your business’ account
  • Assigning at least two workers to count and confirm incoming receipts
  • Ensuring that all incoming checks are properly endorsed  
  • Personally investigating client protests about yet to be received payments    
  • Procuring a ‘For Deposit Only’ stamp for use on all incoming checks

A ‘For Deposit Only’ mark on a check would prevent a dishonest employee from cashing it 

Understanding your Business’ Books

Fraud is easier to occur where bookkeeping is unsupervised and sloppy. Here, your employee can easily keep receipts and cash. To avoid embezzlement, you need to know your business’ bookkeeping and recordkeeping system.  This knowledge will allow you to easily review your books for inconsistencies. You thus minimise your risk of fraud.

Upping Your Accounting Knowledge

You could find it challenging to comprehend the numbers.  Some avenues for improving your knowledge include:

  • Asking your accountant to give hints on crucial items to examine
  • Enrolling for an accounting and bookkeeping course

Splitting all Responsibilities

As a general rule, you need not allow one worker to manage all the facets of a financial transaction. Separate the transaction into bits such as:

  • Check writing
  • Check signing
  • Check mailing

Have separate individuals undertake the different bits. By employing this fraud prevention technique, you make it hard for some dishonest employee to:

  • Embezzle you
  • Doctor your records as a cover-up strategy

Thoroughly Observing your Payroll

There are two options of ensuring strict payroll control, namely:

  • Having a separate payroll account
  • Thoroughly scrutinising payroll checks

Distinct Payroll Account

Deposit the precise cash you will expend via payroll into the account.  Carry out a reconciliation exercise each month.

Thoroughly Inspecting Payroll Checks  

Some approaches include:

  • Reviewing checks to ensure they are written to known persons
  • In case you identify, unknown payees, search for them
  • Keeping a weekly long of your staff
  • Ensuring that your business’ payroll file cannot be altered without your approval and signature
  • Reconciling this number with the checks you write

Conducting Annual General or Fraud Audits

Without warning, invite a third-party professional to audit your business accounts. A general audit uncovers an embezzler’s actions. A fraud audit helps to uncover scams and prevent their future recurrence.       

Carefully Managing Checks

Some measures for ensuring caution while handling checks include:

  • Locking them in a drawer
  • Never signing blank checks
  • Conducting ‘voided check’ exercises thus confirming all cancelled items 
  • Using pre-numbered checks
  • Frequently inspecting for missing check numbers
  • Requiring all checks over some minima amount to be double signed; one signature being yours

Sending your Accountant or Bookkeeper on Yearly Vacation

Embezzling employees sometimes decline to go on leave so as to keep concealing their actions. To prevent this possibility, ask your accountant or bookkeeper to go on annual leave.  Ideal leave duration lasts 2 weeks and takes place during book closing times. While the employee is away, delegate the duty of verifying the books to someone else.    

Employee theft is the most common form of embezzlement emanating from workers. You need to take certain fraud prevention measures so as to ensure that your business does not become a victim of worker dishonesty. Some recommended approaches include; Personally receiving your bank statements, separating all tasks, conducting yearly general or fraud audits, carefully monitoring your receivables, keeping your records safe, understanding your business’ books, closely monitoring your payroll, being careful with checks, and sending your accountant or bookkeeper on yearly vacation. These fraud detection and prevention measures can go a long way in protecting your business.

Copyright (C) 2016, Simple Alliance Kenya Limited

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