4 Tips To Protect Your Business From Internal Fraud

internal business fraud prevention

Internal fraud is like a family secret that nobody wants to acknowledge. It is a thing few business owners in Ireland think about, let alone think will happen to them. Statistics suggest that only a small proportion of businesses in Ireland are protected from fraud. The incidence of fraud within Irish companies by its employees is sadly on the increase.


According to a 2020 PwC report, Economic Crime and Fraud are at their highest-ever levels. More than half (51%) of companies in Ireland have experienced some form of internal fraud since 2018, which is 4% higher when compared with global companies.


How Can You Reduce The Chance Of Internal Fraud In Your Company

There are certain steps and processes Irish businesses can put in place to reduce the chances of internal fraud happening to them. In this article, we will give you tips to prevent internal fraud based on our years of experience with a wide variety of business types.


1. Don’t Let One Single Employee Do All The Accounting & Bookkeeping!

Don’t let one single employee do all the accounting & bookkeeping without some form of checks and balances in place.


Due to their size and perhaps financial constraints, many small Irish businesses have one person that exclusively handles bookkeeping functions like; client receivables, processing client payments, paying invoices, managing petty cash, recording functions in the accounting system and handling any cash sales.


This makes it easy for cases of internal fraud to go unnoticed.


QUICK FIX: Businesses should have at least two people handling accountancy functions or at a minimum, one person carrying out the work with another signing off on payments both cash and through payment platforms  – with accounting and cash-handling separated.


This is one of the true benefits of having your finance back office outsourced. At aperio, we have internal systems that prevent something like this from happening.


2. Know Your Employees Well.


As we come out of the pandemic, this task may become more difficult as companies take on extra staff or replacement staff. 


Every business endeavours to hire honest honest employees but hoping for the best doesn’t always work the way a company wants..


Don’t assume popular, long-serving or hard-working employees won’t commit fraud. It is human nature unfortunately for some people to give into temptation when faced with financial pressures. It’s the hard workers who’ll end up handling several duties, giving them even more scope to commit fraud. 


Make sure your staff takes their holidays. Fraud is mostly exposed when the perpetrator isn’t around to cover their tracks. It’s important as a business owner to do your own checks and hire specialists such as us at aperio to help examine your books. It’s your responsibility to either check your books yourself, or outsource this to a specialist. You need to be proactive, rather than reactive. 


QUICK FIX: Use a formal hiring routine to help prevent dishonest hires. It’s important to check each new hire’s references from previous employers. Listen to what previous employers don’t say instead of what they do say. This is especially true for employees who’ll be handling cash or managing payments and customer bank account information.



3. Make Sure You Have Controls In Place.


Small businesses often feel immune to fraud, but you should still introduce controls that can detect (and help prevent) fraud. Perhaps; restricting employee access to financial account data, limiting access to inventory or stock, establishing multi-person sign-off for expense claims, overtime, cheque writing or other accounting or payroll functions, using audit logs or audit trails to track and trace all financial transactions should be implemented into your business.


QUICK FIX: A software platform like Xero can ensure that there is a digital trail as well. Having a digital trail will help prevent, and detect internal fraud in your business. 


4. Keep an eye on your business bank accounts like a hawk


This might seem like an obvious thing to say but sometimes in Ireland, it can be the area where company owners will say, ‘I should have seen that in the bank balance’.


Of all the fraud prevention tips, this one’s become easy to implement. Online banking makes it quick and painless to check account activity whenever they like. It’s an exercise that is always worth doing. It is a double check to make sure that paper-based statements haven’t been manipulated.


The key items to look for are: missing or out-of-order cheques, unknown payment recipients and payments made to unrecognised businesses or personal accounts.


Simply letting staff know that you’re reviewing account activity can help prevent fraud.


Make sure you audit high-risk areas often, areas such as cash, cash refunds, product returns, inventory management and accounting and bookkeeping functions.


Employees should be told that audits will take place on a regular basis but they shouldn’t know what the schedule for those. 


By making the audits random, you are more likely to dig out fraud.


If you suspect fraud in your company, you can contact the Garda fraud division.


Outsourced Bookkeeping

Do you need help with outsourced bookkeeping? Since 2013, aperio has been helping business owners take control of their finances and build profitable, sustainable businesses.


Book A Free Consultation

Are you looking for professional help? aperio is a Cork-based outsourced accounting and consulting company that can take care of all your company formation, bookkeeping, management accounting, financial compliance, and financial project work such as grant applications.


Click here to schedule a call with us.

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