As your business grows, expanding its reach and hiring more and more personnel, it is at increasing risk of embezzlement and financial fraud within its ranks. But sadly, such embezzlement can be difficult to spot because it can take many forms. To help your company find problems that may be eating into profits, here are a few of the places that employee-related fraud can occur.
1. In Accounting
Accounting, of course, is a risk point because it’s the place where money trails are made and numbers are crunched. A payroll employee, for instance, could change their own salary, cut a paycheck, and then change their salary back. Because payroll is often overseen through reports rather than by verifying checks, this could be hard for others to identify.
Potential weak spots are plentiful within accounting. Accounts receivable may receive cash that someone could pocket. Accounts payable employees may work with vendors to over-bill or even double-bill. Or general ledger technicians can make fraudulent transactions to pay themselves or a friend.
2. Within Payroll
Payroll fraud can also occur outside the accounting department. For instance, an employee may have another employee clock in for them even though they are not working. Someone might report excess overtime or pad their hours when reporting time worked.
Payroll fraud is very common and can go unnoticed for a long time. After all, an extra hour of overtime per week may not catch anyone’s eye. But over time, it will add up to serious dollars — particularly if other employees see the fraud working for someone and decide to try it themselves.
3. Around Inventory
Any time there is a cache of inventory, it faces the risk that someone will pilfer it. Most companies focus on the most valuable inventory, such as technical parts or precious metal components. But these may be harder to steal or harder to make money from. Instead, someone might target items that are unprotected, such as waste to be recycled or even office supplies that could be returned for a cash refund.
4. Along the Cash Chain
Cash is, of course, easily pilfered because it’s not easily tracked. While it’s obvious in areas like cash registers, other risk points are harder to see. What about petty cash in various departments? What about those who move, count, or deposit cash? How about employees given cash to do a transaction, like arrange the company picnic? And cash-like instruments, such as company credit cards, can be very tempting.
5. When Hiring or Contracting
How can hiring cause fraud? The most common form is to bypass procedures to hire a friend or relative. A department manager, for example, excludes qualified candidates in order to hire their brother-in-law’s computer repair company. If they hired this person based on their connection — and especially if they didn’t follow procedures — the company has been defrauded of fair, unbiased competition and the best candidates.
6. In Management
No one wants to think that their trusted managers could be committing fraudulent acts against the company, but it does happen. Management-level employees can be a bigger risk than usual because they operate with much greater reach and less oversight. A manager could do anything from turn in fraudulent invoices from a fake company to funnel corporate money to their home improvement project.
If you think that money may have been making its way into the wrong hands within your company, the possible methods and culprits are many. The best way to narrow your search and find reliable evidence is to work with an experienced private investigator. J.P. Investigative Group, Inc., can help. Call today to make an appointment and discuss your concerns.
