The business world of today is wrought with perils that face business owners each day. Procurement fraud is an expensive problem that is costing businesses a great deal of money each fiscal year. This problem is not unique to large business and is also an issue for medium and small sized businesses. The good thing is that procurement fraud prevention is possible so long as business owners take certain steps. The following information is intended to explain a few measures that you can take to prevent procurement fraud. By conducting thorough background checks, establishing a whistleblower hotline and reinforcement from management that fraud will not be tolerated, your business is much less likely to have to deal with the repercussions of procurement fraud.
Background checks are so important for businesses. By taking steps to ensure that you are not hiring employees who have a criminal history or who have had issues involving fraud at their prior places of employment, you are much less likely to end up with employees that misuse corporate funds. If you do not have the resources to conduct background checks on your own (an issue that many smaller businesses may face), you can enlist the assistance of a professional by hiring a third party to come in and perform the background checks for you. Some background check services even enable you to send the names and personal information of potential employees to them via a secure channel so that you do not have to travel to their location or have them travel to yours in order to relay the information.
Establishing a whistleblower hotline is imperative for procurement fraud prevention. Additionally, in accordance with Sarbanes-Oxley, public companies are required to have their own anonymous whistleblower hotlines that their employees can call if they wish to report violations, accounting issues or auditing issues. Many midsize corporations are not required to follow the rule, but midsize companies can also benefit from a whistleblower hotline. Inside tips are one of the major ways that fraud is detected within corporations, and a large percentage of inside tips come via a whistleblower hotline. It is generally advisable for a third party to operate the whistleblower hotline, so that those who wish to submit a report are not afraid of internal backlash after they have submitted a complaint.
Reinforcement From Management That Fraud Will Not Be Tolerated
The most important thing for procurement fraud prevention is that management sends a strong message that fraud will not be tolerated. The message needs to come from the top. Senior management members need to ensure that those who work beneath them understand that incidents involving fraud will not be tolerated under any circumstances and that any such instances of fraud will be prosecuted to the fullest extent. Employees tend to follow the example that is set for them by members of middle management, and members of middle management tend to follow the example that is set by the members of upper management.
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