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Dale Hammernik’s 10 Ways to Prevent Employee Fraud

I find myself playing a sort of funny role when I sit down to write these weekly posts.

On one hand, I’ve discovered that one of my most critical roles to play with my referral partners and contacts is to encourage them in the face of all of the doom and gloom running rampant in our media today. This requires me to write like a cheerleader sometimes!

And, with the other hand, I’m an accountant! I’m the uptight one in the room, and the one who is punching the brakes just when the visionaries are kicking their spurs and cracking the whip. (I also seem to specialize in mixed metaphors, apparently.)

Well, this week, you get Uptight Dale. But drink up — it’s good for you.

Dale Hammernik’s 10 Ways to Prevent Employee Fraud
“You can’t leave a footprint that lasts if you’re always walking on tiptoe.” – Marion Blakely

You don’t have to be a huge business for there to be major holes in your profit bucket!

I’ve seen enough business owner friends get burned because they did NOT have the following procedures in place, that I wanted to share these policies with my entire list.It is a very good idea to take every reasonable precaution to preventemployee fraud or theft in your company, and further — in the event it does occur — to be sure you are adequately protected with the right insurance.

So, I developed this fraud checklist which is a must for every business. Some of them might seem obvious, and yes they are, but do document (and enforce) this.

Don’t feel as though you’ll seem like a “big corporation” by implementing these — you’ll just be a smart business.

Oh, and I’ll even give you permission to put it in your employee manual.

Hammernik’s Fraud Checklist
1. Develop a code of conduct which explicitly prohibits employees from committing fraud, having conflicts of interest or engaging in any other form of illegal or unethical behavior. Ensure that all your employees, vendors and customers get copies of it. Have key employees provide annual confirmation of their compliance.
2. Have a clear company policy on time and expense reporting.
3. Verify the credentials of all new vendors before they are authorized to supply the company.
4. Make sure all disbursements are properly approved.
5. Use direct deposit for payroll.
6. Require two signatures on checks over a certain amount.
7. Review the bank statements before anyone else does. Consider having them sent to your home address. Review cancelled checks (or copies) and match payee names with endorsements. Review invoices for any payees you don’t recognize.
8. Make sure bank statements are reconciled each month and that your accountant reviews the bookkeeper’s work periodically.
9. Make sure everyone takes their full allotted vacation time and be suspicious about anyone who appears to live beyond their means.
10. If something seems odd, whether it is a disbursement to an unfamiliar vendor or an unexpected expense, check it out and don’t accept a casual explanation.

You can catch or prevent employee fraud 99% of the time just by following these simple steps.

I’m personally dedicated to the success of your business–and your staff. Can other tax accountants say that?

Feel very free to share this article with a Waukesha County business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Waukesha County families and business owners. And we always make room for referrals from trusted sources like you.

Warmly (and until next week),

Dale Hammernik
(414) 545-1890

Hammernik & Associates