4 Signs Of Employee Fraud, And What To Do About It

4 Signs Of Employee Fraud

Many small business owners are too busy to spend time pouring over every petty cash receipt or employee credit card statement—you have bigger fish to fry. Of course you want to trust your employees, but the truth is that workers can unknowingly or knowingly take liberties (aka steal). It may be small amounts—an extra cup of coffee on the corporate card here, a falsified expense receipt there—but after a while it really adds up.

A recent study by the Association of Certified Fraud Examiners (ACFE) found that 16.5 percent of of businesses with under 100 employees had experienced expense reimbursement fraud, and 12 percent had suffered cash-on-hand fraud. Why is it so high? Because small businesses don’t have the resources to monitor fraud.

As the ACFE report notes, “The limited financial and human resources at most small organizations make them uniquely susceptible to fraud; they often lack the means to enact sophisticated anti-fraud controls, and they can be particularly devastated by the fallout from any fraud that does occur.”

So how do you spot fraud, and how do you prevent it in the future? Let’s take a closer look.

Warning Signs of Potential Employee Fraud

  1. Change In Behavior: If a once-cheerful employee becomes nervous, secretive, and defensive, it could be due to fear of being caught stealing. If you notice an unexplained personality shift, don’t level any accusations, but do double-check expenses.
  2. Living Beyond Means: In the ACFE study, this was the most common red flag for asset misappropriation (46 percent of cases). If a lower-level employee suddenly shows up in designer clothes and a fancy new purse, that money had to come from somewhere. She could be borrowing money or running up a personal credit card, or she could be siphoning company money.
  3. Financial Difficulties: If an employee is in bad financial shape, he may turn to theft to get some quick cash. If you know that the employee is having a tough time, be sympathetic, but watch your books.
  4. Too Easy To Resist: Small businesses often don’t have enough employees to provide oversight by dividing duties. Is the same person who reviews petty cash receipts in charge of replenishing the supply? Does the person who buys office supplies also approve credit card expenses? Be extra careful when you know that you have control weaknesses.

How To Prevent Employee Fraud

Spotting employee fraud is good, but preventing it in the first place is better. Avoid awkward conversations altogether by using business prepaid debit cards with spending controls to make sure employees only make the kinds of purchases you approve and don’t exceed the limits you set. A reloadable business prepaid debit card like the Bento card gives you control over every employee’s spending 24/7. With just a quick glance, you can see who is trying to make unauthorized purchases and where.

If you don’t have time and resources to dedicate to preventing fraud, a Bento business prepaid debit card can help do it for you.