If your company has several locations (such as with retail or restaurant chains), you have unique fraud-prevention concerns. After all, you cannot be everywhere at once. The more establishments you operate, the more difficult they are to oversee. Without the proper checks and balances in place, fraud losses in one location could jeopardize the overall health of your business. Consider developing a strong antifraud program if you do not currently have one in place.
Comprehensive Approach
Fraud is an ever-present issue for independent owners and franchisees that run multiple locations. Depending on the products and services that you provide, your company may be vulnerable to employee, credit, returns, and gift card fraud. Mitigating these risks necessitates a comprehensive plan that does not rely solely on individuals to make the ethical choice when presented with temptation.
For example, to prevent employee fraud, applicants should be required to undergo background checks to help detect any prior wrongdoing. Background checks help you avoid hiring potential fraudsters by demonstrating that your company is committed to ethical practices.
Insist that all new workers receive fraud prevention training. Your program should contain an overview of the controls you have in place, such as procedures for cash handling and credit card data protection, as well as emphasize the vital role staff play in preventing financial theft. Also, provide frequent antifraud refreshers to current employees. This is especially critical because criminal tactics evolve continually, as does the technology that your workers may use to combat fraud.
Segregation of Duties
One of the most fundamental antifraud aspects for every firm is the segregation (or separation) of duties, which prevents personnel from overseeing more than one step of a business or accounting process. Here’s why: Employees with access to your company’s books, incoming mail, and bank account may be able to carry out a variety of fraudulent activities while avoiding detection. For example, you may outsource payables and receivables to a third-party accounting agency, receive mail for all locations at your office, and force individual store managers to deposit daily earnings in strict accordance with established processes.
Routine job rotation, mandatory vacation policies, and surprise audits all make it more difficult for corrupt staff to commit fraud and evade detection. Fraud experts have repeatedly determined that making an anonymous fraud tipline available to employees, vendors, and customers reduces fraud risk. So, make sure to offer a hotline and prominently display the number in all of your locations.
Furthermore, depending on the size of your organization and the number of locations, you may want to hire a CPA or fraud examiner to perform a fraud risk assessment. These assessments often identify existing internal and external fraud threats, their likelihood of happening given current controls, and the controls that could reduce risks. It’s likely that some of your locations are more secure than others, allowing you to focus on the stores with the most serious fraud concerns.
Leverage Technology
Updated technology can also help reduce fraud risk across numerous locations by remotely monitoring point-of-sale transactions and conducting store surveillance. Artificial intelligence (AI) is now being used to identify personnel who process an excessive number of returns or refunds, as well as to highlight excessive inventory turnover or higher-than-expected costs in relation to sales. Such red flags aren’t enough to prove fraud, but they serve as a starting point for an investigation.
Contact us to learn more about how new (and old) technologies can assist business owners with multiple locations in preventing and detecting fraud. We have strategies for robust, scalable internal controls.
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