Here's a chilling prospect: "If you own a growing company and spend most of your time preoccupied with developing new products and markets, you're especially vulnerable to employee theft and fraud," warns Thomas Creal, managing director of investigation and litigation support at the Chicago accounting firm of Checkers, Simon & Rosner. Among the problems: "Your company could minimize its risks in its financial department by organizing a system of safeguards and double checks, but that's probably way too expensive."
So instead, to identify and reduce your risks Creal suggests running random comparative checks -- trend analyses -- going back three to five years, focusing on these likely hot spots:
Excessive reimbursement of expenses. "An employee who wants to break the system will identify the threshold at which his boss starts paying attention -- maybe $25 -- and file false invoices below that number." You should require backup documentation on all expense filings, even the small ones.
False invoices. To subvert employees who set up dummy corporations and then submit fraudulent bills, analyze all payments to new or unfamiliar suppliers by running Dun & Bradstreet credit checks or otherwise verifying each new company's authenticity. You may also want to conduct random spot checks of deliveries from new suppliers to make certain the goods received match invoice descriptions.
Inventory theft. "Maybe someone on one shift in your warehouse is selling inventory out the back door," Creal warns. "Look for trends that don't make sense, like a de-crease in inventory during a month when revenues go down as well." -- Jill Andresky Fraser