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What Makes A Good Employee, Go Bad?

In every work environment, there’s an unwritten level of trust. The employee trusts the employer to treat them fairly and compensate them for the duties they perform.  The employer trusts the employee to perform their assigned duties to advance the business.  A breach of that trust at the hands of an employee theft has far-reaching implications.

As well as financial loss, insider fraud negatively impacts employee morale, company culture, and the organization’s reputation in the marketplace. Small business owners pay the highest cost for financial crimes; 55% of cases occur in companies with fewer than 100 employees.

The Association of Certified Fraud Examiners (ACFE) says 87% of occupational fraudsters are first-time offenders. So you may be wondering, what makes a good person go bad?

According to a theory known as the Fraud Triangle, there are three factors that must be present at the same time for an ordinary person to commit a fraud. They are:

  • Pressure – they must have a financial problem they are uncomfortable sharing, and they don’t feel they can solve with legitimate means.
  • Rationalization – because many of them are first time offenders, they do not view themselves as criminals and they can “justify” their actions by saying things like “I’m only borrowing the money” or “They don’t pay me enough anyway.”
  • Opportunity – this is when they discover a way to commit their crime with little to no chances of getting caught. This factor is the only part of the triangle that the business owner can control.

Since, the opportunity part of the triangle is the only part you can control, here are five things you can do right now to build T.R.U.S.T. in your organization.

T – Time off – Employers should require all employees take time off each year; many frauds are uncovered when the fraudster is out sick or on vacation.

R – Rotate duties – Employers should rotate duties among their staff members so that no one gets too comfortable in one position; this also strengthen your organization because your staff members are cross trained

U – Unannounced audits/cash counts – Employers with petty cash account should audit or count the cash at infrequent times; this keeps the custodian on their toes and eliminates the desire to “borrow” from the stash.

S – Separate password/login – Employers should not allow employees to share passwords or logins.  Having separate passwords allows business owners the ability to track all the transactions made by each employee.

T – Training – Employers should invest in fraud awareness training and support whistleblowers. In addition to creating an ethical environment it helps to mitigate fraud; 46% of fraud cases are discovered by a whistleblower.

To learn more ways to protect your business from insider fraud, grab a copy of, Did You Hire a Fraud?

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Bernadette L. Harris
Forensic Accountant at By The Book Accounting
Bernadette L. Harris is a Forensic Accountant, Certified Fraud Examiner, Expert Witness, Keynote Speaker, and #1 bestselling author who has helped hundreds of business owners put systems in place to protect their businesses and prepare for growth.

Her latest books, Business Blueprint 2.0 and Did You Hire a Fraud? can be purchased at: Shop.BernadetteHarris.com.

She speaks to audiences across the country about entrepreneurship and fraud prevention. Follow her on social media @TrustBernadette

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