Alliance articles

Steel yourself for a shock, your staff could be involved in fraud

Maybe you're not overly concerned if a company biro or two disappear. You may even be able to turn a blind eye to the sudden decline in stocks of the business's velvety toilet tissue.

But you probably won't want to ignore this shocking statistic: Employee fraud has almost doubled in the past three years and is now valued at £78m.

This is the alarming outcome of a recent survey conducted by BDO Stoy Hayward, using data from the Serious Fraud Office and the DTI. Far from being petty crime, employee fraud is both serious and insidious. And the problem is getting worse. Of course, the majority of your staff will be totally loyal and honest, but it only takes the odd one or two to make a real impact on your bottom line. They trade on your trusting attitude and then take advantage of it.

The survey finds that it's the drip-drip fraud that's the worse. The odd little thing; the occasional bit of behaviour over a long period of time. It all adds up (quite literally) but it's never obvious enough to be noticed at the time of the crime. Stock disappears. Funds are mysteriously diverted or attributed to expenses that were never incurred. Cash is pinched. This is all entry level stuff.

Move up the chain and you get sales fraud: kick-backs from matey suppliers, bills from fictitious suppliers. Go higher and you find false accounting. Fiddling with sales figures so that managers are able to earn their bonuses for hitting targets. Hiding bad debts under the rug. Fixing prices. Colluding with other businesses to unfairly win contracts. Even VAT and tax is not exempt from pilfering and fiddling.

But does this really happen?
Yes.

One of many stories we could tell involves the financial controller of a hotel group who found a way to re-credit his credit card after doing dirty dealings with the travel agent he was in cahoots with. He found a way to withdraw cash via other office staff, too. The total sum was a tidy quarter of a million. And, to cap it all, when he realised he was about to be caught stashing money in his filing cabinet, he attempted to frame the Finance Director.

How on earth do you stop this happening to you?
Well, first things first, put your devious head on and assess all the situations where fraudsters could operate. Next, make it quite clear to your staff how the business will deal with offenders. Train your staff how fraud damages the business and show them how to look for it. Funny though this sounds, this will not teach people to misbehave but, rather, send a clear signal to the bad apples in the pile that you're on to them. You could also set up what's commonly known as a whistle-blowing scheme. You reward people for shopping the fraudsters and set up a clear channel of communication with you, should anyone spot something amiss.

Great. All sound advice. But it could still be insufficient, with the best will in the world.

That's why you need Theft By Employee insurance cover.