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Face up to fraud

You think you know someone well and you trust them with your money.  But the harsh reality is that fraud or theft could be happening right under your nose.

 After all, Bernard Madoff was deemed a safe pair of hands by friends-turned-investors who now find themselves victims of his $50bn fraud warns Alan Williams, managing director of Southampton accountancy practice HWB.

 "The Madoff case holds lessons for us all, particularly the owners of SMEs who only find out about fraud and theft when it's too late," says Alan. "Very few businesses are able to fully recover from an internal theft so it's important to ensure that the necessary controls are in place and the risk of employee fraud is managed."

 "The first step is to accept the fact that fraud can happen to any business.  The next is to set an appropriate, ethical example to employees which includes fair play and treats them with respect.  Raise awareness by asking staff to identify ways in which fraud could be committed within your company and how it can best be avoided before developing a code of conduct that explicitly prohibits employees from committing fraud, conflict of interest and other illegal acts."

 Other simple and affordable measures to combat fraud recommended by HWB include:

• Conducting careful background checks before hiring staff, particularly if they are operating alone
• Verifying the credentials of all new suppliers before authorising them to supply your company
• Taking note of employees who appear to be living substantially beyond their means
• Ensuring all expenses are properly approved
• Implementing the latest cheque security measures and protecting the company against alterations by adopting electronic transfers for large payments and using direct deposit for payroll.
• Reviewing original bank statements and looking out for unexpected overdrafts or declines in cash balance before passing to your bookkeeper
• Ensuring that bank statements are reconciled each month and asking your accountant to review the bookkeeper's work from time to time.

 For further advice please contact Alan Williams at HWB on 023 8046 1200.