Dictionaries define fraud as “wrongful or criminal deception intended to result in financial or personal gain.”
Fraud typically involves misrepresentation of facts, either by withholding critical information or providing false statements to another party for the specific purpose of gaining something. Although fraud comes in different forms, it can be categorized primarily into asset misappropriation, financial statement fraud, and corruption.
Here are a few measures a business can adopt to avoid financial frauds in the workplace:
- Build a positive work environment – Having a positive and productive work environment reduces chances of frauds within the organization. The organization’s work environment must encourage employees to adhere to the set policies and procedures.
- Hire trustworthy employees – Hiring honest employees and building trust among them is a good way to ward off frauds.
- Institute Internal Control – To safeguard a business’ assets, internal controls are needed. These measures ensure efficiency in a firm’s operations and help maintain integrity of its accounting records.
- Monitor and educate employees – Monitor employees to ensure adherence to the policies and procedures of the organization. Inform employees about the organization’s internal control policies and procedures, including those to mitigate frauds.
- Reduce, even restrict, cash transactions – Cash transactions increase the possibility of frauds and theft as against digital transactions. Moving towards electronic payments can go a long way in reducing incidence of financial misappropriation.
- Know Your Business Partners – Do a thorough background check before getting into a business relationship with other businesses or individuals.
- Keep track of investments that have unusually high returns – If an investment shows high return even during major market downturns, ask an expert to review the investments and the corresponding financial statements of the companies in which the investments are held.
- Reconcile accounts – Reconcile cash and bank accounts on a regular basis. This is an effective way to identify unusual transactions.
Fraud can result in financial losses and may even lead to the downfall of an organization. Having efficient systems in place can significantly reduce frauds. Adhering to the set policies and procedures are crucial.
The cost to prevent fraud is less expensive than the cost from the resulting fraud.
Baywiser, with its experienced advisors, can help set up processes in an organization or in analyzing the books of accounts to unearth any suspicious transactions. Reach us at [email protected] for more.