On daily basis the world grows in every aspect – age, civilisation, technology, industrialisation, and so on. As these various areas grow, humans also become wiser and smarter to make the world better. On the other hand, some humans become more shrewd, more tactful and more skilful in vices such as robbery, fraud, and so on. According to U.S. Department of Commerce, employee theft costs are rising at a rate of 15% per year.
CONCISE STATISTICS TO NOTE
- Fraud causes companies to lose an estimated 5% of revenue every year. (Source: Association of Certified Fraud Examiners [ACFE]).
- 75% of employees have stolen at least once from their employer. (Source: CalRest.org).
- More than 30 percent of business bankruptcies are due to employee theft. (Source: Service Management Group).
- 90% of all significant theft losses come from employees. (Source: Willis North America).
- Every year, businesses lose $50 billion as a result of employee theft. (Source: U.S. Department of Commerce).
- 72% of all occupational fraud is committed by men. (Source: ACFE).
- A typical fraud case lasts 14 months before it’s detected. (Source: ACFE).
- Fraud cases most commonly occur in these four areas: operations, accounting, executive and upper management, or sales. (Source: ACFE).
- Founder and executive fraud costs a median of $600,000, but only accounts for 20% of cases. (Source: ACFE).
- 42% of fraudsters live beyond their means, while 26% have issues with their finances. (Source: ACFE).
- One-third of perpetrators commit more than one type of fraud. (Source: ACFE).
- 44% of fraud cases occur at private companies, while 26% occur at public companies — both having a median loss of $150,000. (Source: ACFE).
REFLECTIONS ON THE STATISTICS
From the abridged statistics, we can see the huge losses that annually arise from employees’ theft and frauds. What makes these frauds and theft possible? Some of the causes are
- Carelessness of the business’ owners,
- Unchecked trust placed on some operators and leaders,
- Lack of system or team to prevent frauds and theft in some organisations,
- Allowing workers to work in a department or occupy a position for too long time, and
- And lots more.
To prevent frauds and theft from workers in any organisation, these following twelve (12) preventive measures will help.
1. REGISTER ALL CUSTOMERS IN THE DIGITAL SYSTEM
Any organisation that depends solely on manual method to keep his customers’ records will always be a victim of fraud and theft from its cunning, dubious, and pretentious workers. This is a modern world; every organisation needs to have the records and data of his members, workers, and customers in digital database for proper monitoring.
Why is this a necessity? I will use school system as a scenario. Every school needs to have the data of each student in digital database. By having this, each student will be given a unique identification number. This ID will be used for all payments and activities related to the students. By so doing, every money paid by each student for each season, each year, and the whole schooling time in the school can be queried and tracked with ease. With this digital system in place, there will be no easy road or room for fraud as long as the payments are recorded digitally. This is why every school needs school information management system like SoftDunamis Solutions Suite.
In the same vein, every other organisation other than school needs related online digital system to manage the records and transactions of all his customers in other to stop or prevent its staff from ruining the organisation.
2. ALL MONIES AND FEES COLLECTIONS DONE USING THE DIGITAL SYSTEM
An organisation may have the records and data of all its customers digitally without using such system for fees collections and transactions monitoring. Until an organisation has started using the digital system for all its transactions – collections and payments – the organisation will continue to be exposed to internal or employees’ frauds.
With the experience I have while observing how some use SoftDunamis Solutions Suite to manage school transaction, I see great opportunities for internal frauds to take place. How? Some users use it to track only tuition fees collections without using it for other collections.
Every organisation is expected to behave like standard commercial banks. Such banks do all their transactions with digital online real-time system. For decades now, this method has been very useful in curbing or preventing internal frauds and theft.
Let every financial inflow be collected using digital system.
3. ALL SALES SHOULD PASS THROUGH THE SYSTEM
Use digital system for all the sales in the organisation. Let every sale be automatically and digitally recorded by the system. Let all the products and their respective prices be inputted into the system. With this, the system records the sales – quantity and amount. This is a great fraud preventive measure in sales. Nothing should be sold without the system. We have such system incorporated into SoftDunamis Solutions Suite for sales management.
4. ALL EXPENSES AND PAYMENTS DULY RECORDED IN THE DIGITAL SYSTEM
Another observation is that some users or organisations use digital system to receive cash (i.e., revenues collections) only without using it for cash payments (i.e., expenses transactions). This makes it easy for internal staff to steal and defraud such organisations. Let every payment be done through the digital financial software provided for the organisation. The rule here is that nothing should be spent if has not passed through the digital system. If you use SoftDunamis for your school, make sure that you post every expense using Finlen Core app within the system.
5. PERIODIC RANDOM MANAGERIAL INSPECTION OF OPERATIONS AND RECORDS
Normally people do not do what is expected but what is inspected. It is good to trust good people. However, many use this trustworthiness that they have built to defraud. No matter how much you trust anyone, still inspect him or her. Let the inspection be done randomly and periodically. Let the inspection come upon the next person as the sudden and unannounced arrival of robbers in the night.
6. USE SYSTEM TO MANAGE STOCKS AND INVENTORIES
Every organisation acquires and dispenses inventory or stocks. If there is no proper recording or account for these items, plenty of them will be siphoned or diverted by staff for personal use. This inventory or stocks can be tracked manually but they can be better tracked electronically. As new stocks come, the available quantity will rise. Likewise, when they are dispensed, the available quantity will fall. With this method, without blinking, one can easily know or tell the stock balance at any time. By so doing, the stocks are properly monitored while fraud and theft are controlled. The system will also help to know who and who were given and the purpose by which they were given the items.
7. CARRY OUT INTEGRITY TEST OCASSIONALLY
In those days, while still working in a bank, we used to have what was tagged “Integrity Test”. One of the core values of the bank is “Integrity”. This test was there to test how trustworthy staff members were as far as money was concern.
These are some of the ways it was done in the bank. One, a senior bank worker can give cash to a known customer to pay or transfer in the bank. While giving the cash, the officer adds some additional few notes of money into the money other than what he or she fills in the deposit form. While counting, the bank teller is expected to see the excess notes and give it back to the customer who comes to deposit the money. By so doing, the integrity of such teller is tested.
Two, as a boss, I sometimes put extra notes of money into the cash to be loaded into ATM. Before loading, any of the tellers was to confirm the cash by counting. There are so many ways to do this integrity test in any organisations. Come out with your own methods as a boss and use them to test the faithfulness, loyalty, integrity, and trustworthiness of your staff as far as money and other materials are concerned. This will help you to fish out thieves, while others who have such intention will desist.
8. DEPLOY STAFF MOVEMENT STRATEGY: JOB ROTATION, GOING ON LEAVE, AND TRANSFER OF STAFF
Association of Certified Fraud Examiners (ACFE) reveals that the longer an employee works at a company, the more revenue damage they cause in terms of fraud. That is the truth! The longer an employee works in a department or in a position, the higher the probability for him or her to defraud the company. The longer he or she works in the position or the department, the more he or she understands the system, the operational and managerial loophole or shortcomings of the organisation. It is paradoxical to know that your best friend is your best enemy. The more a staff member is familiar with a position, a department, or a branch, the more chance he or she has to defraud. To further buttress this, FBI makes us know that 60% of employees would steal if they knew they wouldn’t get caught.
What can we do to prevent fraud from our good and long-serving employees – probably veterans? First, there is a need for regular job rotation. Transfer staff from one department to another. In your company’s policy, you can specify how long an employee can work in a department before being transferred to another department. Even if it is not specified, make sure you periodically do job rotation for your staff in order to curb or prevent internal frauds and theft in the organisation.
Second, there is a need to make every staff member to go on leave annually. No staff member is to be seen as too indispensable to go on leave. Going on leave will give room for another worker to temporarily take over the office or position of the former until his or her leave will be over. During this leave time, every fishy thing or deal (fraud), if any exists, carried out by the staff member on leave might be detected by the employee who comes to relieve him or her.
Third, if your organisation has more than a branch, let workers be transferred occasionally from a branch to another. This prevents an employee from being a powerbroker in a branch and this subsequently tames his or her probable power to defraud the company.
9. INSTALL CCTV EVERYWHERE WORKERS WORK
One of the greatest fraud and crime prevention technologies invented is closed-circuit television (CCTV). With the presence of the CCTV cameras everywhere in the company, even the smartest or most skilful thief in the company will be afraid to make a thievery move. This shows that CCTV serves as a deterrent to employee frauds and theft. In you have not installed CCTV in your organisation, you need to do so as soon as possible. The cameras should be everywhere fraud and theft can take place. Bear this in mind that CCTV can do the security surveillance than any of your company’s security officers can do. Metaphorically, I will call CCTV a smartest security officer. Should I call it a “robotic” security officer?
10. SET UP INTERNAL CONTROL AND INSPECTION DEPARTMENT
According to Association of Certified Fraud Examiners (ACFE), statistics reveals that one-third of cases of frauds occur because companies lack internal controls. The question is: do you have internal control unit or department in your organisation? If no, your company is porous to internal fraud and theft. ACFE further stresses that the most used anti-fraud controls at organizations include: an external audit, code of conduct, internal audit department, and management certification of statements.
This internal control’s job responsibilities include certification of statements and verification of documents. They scrutinise every account and document. They verify that no transaction is carried out without the proper approval of those who are empowered to approve. According to ACFE, almost half of perpetrators try to conceal the crime by creating fraudulent documents. With internal control in place, these fake or fraudulent documents will be fished out and investigated. This department is the organisational “FBI”.
Moreover, there should be regular inspection from the management or any other unit assigned to do so. External audit can also be used to strengthen this.
11. ENCOURAGE EMPLOYEE-TO-EMPLOYEE REPORTING AND REWARDING SYSTEM
According to Association of Certified Fraud Examiners (ACFE), 42% of cases are reported by tip — most commonly from another employee. What are we learning from this fact? You can use your loyal employees to catch the dubious ones.
Let everybody know that all eyes are on him or her as he or she works in the organisation. Let everyone know that he or she can be reported by his or her colleague if caught. This system alone can deter anyone with untoward intension to steal or defraud to warn himself or herself.
To make this system effective, let handsome rewards be promised and given to those who help to catch thieves and fraudsters in the organisation. Upon their reporting, let the internal control or inspection department take the case over from there and do secret investigation of the reports to ascertain the validity of the fraud or theft. If the reports are true, reward the reporters and deal with the offenders. By so doing, the level of theft and frauds perpetration in the organisation will drop drastically.
12. FIRE THE FRAUDULENT WORKERS
After all I have said so far, one more thing that is very importance in controlling frauds and theft in any company is dealing with perpetrators. One of the tools of every good organisational leadership and management is discipline. Disciplinary measures in organisations include issuance of verbal warning, caution letter, query, suspension, and dismissal, depending on the intensity or degree of the offence.
Organisational frauds and theft are gargantuan crimes. In another word, they are ruinous crimes. If not stopped, frauds and theft can ruin and collapse any organisation. To weigh the volume of the ruin, damage, and losses that fraudulent employees cause to organisations, let reiterate these statistical facts:
- More than 30 percent of business bankruptcies are due to employee theft. (Source: Service Management Group).
- 90% of all significant theft losses come from employees. (Source: Willis North America).
- Every year, businesses lose $50 billion as a result of employee theft. (Source: U.S. Department of Commerce).
What is the moral of all these? Anything that wants to destroy or collapse an organisation needs to be eradicated before it carries out its havoc. What does that mean? Stop that ruinous and heinous worker lest he ruins your company. In a clearer term, fire him or her with zero tolerance. This will serve as a deterrent to all other dubious workers.
WHAT’S NEXT?
Let’s put all these into practice in order to snatch our affected companies from corrupt workers. Every company is expected to exist forever. Let’s all hands be on the deck to ensure that no one eventually kills the companies. I wish every company a continual and unstoppable growth.