According to the Association of Certified Fraud Examiners (ACFE), small, privately held companies are more likely to become victims of fraud than public companies, governmental and nonprofits, with a hefty median loss of $200,000. Here are some action steps you can take to prevent unnecessary losses:
1. Use a system of checks and balances to ensure no one person has control over all parts of a financial transaction.
2. Conduct surprise audits.
3. Secure digital documents in locked or password-protected files.
4. Create a written ethics policy that is disseminated to all employees and updated annually.
5. Require competitive bidding for major purchases and contracts. Insist that related-party deals — like an employee hiring his sister for freelance work — are fully disclosed.
6. Conduct background checks and consider taking on a business insurance policy that covers employee dishonesty.