Bottom Line: React to Expense Fraud Right Away

I once represented a woman who owned three restaurants and who almost lost her entire business because she reacted too slowly to what was clearly, to me, fraud. But she was blinded by loyalty.

She came to me because one restaurant in particular was having trouble and she wanted to understand the ramifications of closing it. So I dug in, reviewed her books, and came to a startling conclusion:

One of her employees had to be ripping her off.

Nothing else made sense. She had plenty of sales, but the numbers didn’t crunch. And the only one who could have perpetrated the fraud was her manager. But my client insisted that I was wrong.

After all, the manager was her brother-in-law.

Six months later, she came to see me again. This time she was contemplating bankruptcy. I again came to the same conclusion, but this time was able to convince her to hire a private investigator. The evidence was soon clear. In the end she fired the manager, never spoke to her sister again, but saved her business.

Dealing with fraud is no easy matter. It requires that one suspend their trust of people whom they like and it may also require dealing with lawyers and/or the police. So no wonder people often avoid it and hope for the best.

But that is the exact opposite of what you should do.

Fraud is a cancer in your business, and the sooner you locate it and get rid of it, the healthier your business will be.

Here’s what to do:

Track it: There are all sorts of different types of potential fraud that a business may encounter, but one of the most widespread is expense reporting fraud. I discussed how to detect this in an earlier post. One of the best ways to prevent this particularly virulent form of business cancer from spreading is to get the right software and track expenses.

And in this regard, my friends here at Concur offer the best products, period.

Deal with it: You need to have a bright line/no tolerance policy when it comes to fraud, for various reasons, but the main one is this: It is the best thing you can do to deter further fraud.

If you uncover an employee committing expense reimbursement or other fraud, you not only need to fire him or her pronto, but you need to make an example of them, and let everyone in the company know what happened. No ifs, ands or buts, no excuses, and no second chances.

This will go a long way to preventing further fraud.

Deal with the legalities: To the extent appropriate, you should also consider contacting the authorities, and also engaging a lawyer to look into getting repaid.

While I normally am fairly warm and fuzzy when it comes to employee relations, the evidence is clear that fraud is a different animal. It cannot be tolerated. The downside risks are too great. In the end, it’s pretty basic. When you suspect or detect fraud—react right away.

Previous posts:

Make Your Corporate Expense Policy Fit Your Company Culture

2 Tips for Writing Your Corporate Expense Policy

How to Successfully Communicate Your Expense Policy  

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