How to Spot Employee Fraud

How to Spot Employee Fraud

There’s nothing more troubling than the possibility that one of your employees is committing fraud against your business. When you hire employees, you effectively enter into a relationship with them. This relationship needs to be based on an inherent trust in one another, otherwise things can go off the rails. Employee fraud is not rare, unfortunately. The data from notes that companies with less than 100 people “lose nearly twice as much per scheme to occupational fraud as larger corporations, for a median loss of $200,000.” If you have suspicions about a team member, you don’t want to brush them off as overreacting. Here, we’ve outlined some ways to spot employee fraud in your business.

Expensive Living

If one of your employees suddenly starts driving a luxury car, carrying expensive handbags, or purchasing vacation homes, it might be a sign something suspicious is afoot. We call this “living beyond your means.” Does this person’s salary correspond with the extravagant lifestyle they have started to lead?

On the other hand, this is a tricky one to really pinpoint, as we have no idea what goes on in people’s personal lives that might lend them the opportunity to purchase fancy things. Behavior such as this is not necessarily a glaring red flag—but coupled with other pieces of evidence, it could prove to be directly tied to fraudulent behavior.

Working Overtime

Employees working long hours and rarely taking vacations could be a sign something is running afoul. One of the main reasons fraudulent employees choose to work so much is to hide bad behavior. How often have we unveiled mischief when covering the workload of a colleague out on vacation? Plus, working off-hours is a tactic used to hide unsavory behavior, as there is less likely to be others around to spot the activity. Secrecy is another warning sign that something could be going wrong. Is the person in question hiding something?

Anonymous Tips

Are you getting “tips” from your other employees about someone in particular? It’s easy enough to hide things from the boss, and oftentimes it’s the coworkers who really know what’s happening. You should take it seriously if folks are coming to you with skepticism about one your employees.

Shifts in Behavior

A once happy and pleasant employee suddenly starts acting agitated and nervous. Does this sound familiar? It could be a sign that the stress of scamming and keeping it secret are having an outward effect on your worker. While behavioral shifts such as this could be completely unrelated to fraudulent behavior, it’s still work checking in with them—and taking a closer look at your business accounts, as well.

When it comes to the success of your business, it’s important to have the most reliable team behind you. If you suspect an employee of fraud, take action swiftly and accordingly. And for the latest news in all things small business, keep checking in with the Financial Pantry—ARF Financial’s leading small business blog. We’ve got everything you need to run a successful small business, including marketing tips, financial advice, and more.