Why the Average Business Fraud Scheme Lasts 16 Months

Fifty percent of all fraud attempts were due to poor internal systems and controls, according to the Association of Fraud Examiners 2018 report. And the findings went on to conclude that most fraud schemes lasted a median duration of sixteen months. Which means the majority of those stealing from their employers had been with the company for a significant amount of time, and were likely trusted to do their day-to-day responsibilities with little oversight. That likely means employers either had very few systems and controls in place to begin with, or their employees took a few months to get used to those systems and develop workarounds.

So, today I want to share with you a few ways you can keep tabs on your financial systems and controls, and prevent fraud from happening in your business.

Creating Footprints

The first thing you can do to help prevent fraud within your business is to make it more difficult to commit theft in the first place. You can do this by creating physical “footprints” within your financial system that cannot be erased, thus creating an audit trail.

This financial control will make it much more difficult for a person to cover up theft, whether by making it clear who had which checks or invoices, or by keeping a permanent record of who altered what accounting records. By making these things obvious and traceable to the offending party, you lower the temptation of bad behavior and increase the odds of it being spotted faster.

Footprints might mean keeping checks under lock and key, with a check log clearly showing who is in control of and responsible for which check series.

This also includes numbering your invoices and keeping a separate invoice log of who has which invoice number series.

Digital Breadcrumbs

Another way you can prevent theft and fraud is to make sure your accounting software is set up properly. Set up your system with individual log-ins for any team member who needs to access that information, and make sure the software permanently tracks any changes to the accounting and who made those changes. (This is an option you can turn on in accounting programs like QuickBooks.) If you don’t know if your particular program has this feature, make sure to ask before making a commitment.

Also, require that your financial staff set up private, robust passwords that they change at least once a quarter.

Physical and digital footprints will go a long way to helping you create an audit trail to spot and track down fraud before it becomes an issue. You will also find that by having such a robust tracking system, you will likely ward off a potential fraudster from attempting to steal from you in the first place. It is much easier to choose a company with limited controls in place than it is to work around the robust system you’ve implemented.