During the various COVID lockdowns, businesses pivoted their operations to enable working from home arrangements for employees, while ensuring the key tasks of business continued.

These changes included altering processes and traditional checks and balances used as reviews and approvals for key business transactions, ranging from processing customer credit notes, processing & paying payroll and paying suppliers.

In a post-COVID environment, many clients are yet to revert their processes back to their pre-COVID structure with the associated higher levels of review and oversight. Key drivers to this include the continued working from home arrangements with employees, whether full-time or part-time, and a belief that the new procedures are a more efficient use of senior personnel’s time.

Opportunity x Pressures = Risk

With the changing financial landscape, higher costs of living, increasing interest rates, and overall economic uncertainty, decisions could be made by a business which could increase financial pressures on key employees. A reduction in bonuses paid or limits on wage increases could trigger additional financial stress for employees, which, coupled with the reduced oversight and review, could result in a “perfect storm” for employee theft and fraud.

Unfortunately, in my 20 years as an auditor, some of the most seemingly trustworthy and unassuming people have been caught defrauding their employers.

Often, the key drivers of this have been financial pressures that the employees were experiencing, or a belief that they were owed something from the business for all their hard work (and hadn’t actually received it).

How To Protect Your Business

From experience, here are some important and practical measures that can be taken to reduce the risks to your business.

Consider Your Processes & Controls

Review your current processes to identify opportunities where a breakdown in controls could occur and implement changes and oversight to reduce the opportunities for fraud. It is important these controls are effective, as checks and reviews in the wrong areas may not stop the opportunity for fraud arising.

Review Security

Review the security levels you have over key data and devices, including ABA file security, payment approval dongles and access and restrictions within your accounting and online banking systems.

Reporting & Review

Regular reporting and review can assist in identifying anomalies. Fluctuations of expenses from month to month, “blow-outs” in budgets and key business ratios (project or sales item gross profit/profitability) could be a result of fraud.

Data Analytics

Your information systems have a vast array of data that can help to identify the beginnings of, or occurrences of, fraud. Emails, payment data, supplier payment anomalies (i.e. monthly invoices paid twice), and audit trail reporting can all be analysed to identify anomalies and outliers for further investigation.

How We Can Help

While initially it can be daunting to discuss, failure to identify and act on potentially fraudulent activities can be significantly costly to your business. So please feel free to contact Paul Quealey below or on (02) 4969 6600 for a no obligation discussion about how Lambourne Partners can assist.