Small Business Face More Fraud in Downturn
Because of the weak economy, Mr. Ansel is considering pay decreases at his two restaurants. "That puts a negative taste in people's mouths," he says, "and I'm afraid they'll feel justified in making bad choices."
Mr. Sklar, the accountant, says business owners should be alert to employees who seem to live a lifestyle that's beyond their means. Employees who guard access to accounting software or never take a vacation also should raise suspicion. Business owners should review every canceled check and look at the signature on the back, he adds, and they should review bank statements each month and check for unusual transfers.
Once a business owner discovers any alleged fraud, he or she should keep quiet while building a team of people to help: ideally, an accountant and lawyer. Most employees are ashamed of what they've done and will agree to strike a deal to avoid prosecution, Mr. Sklar says.
If a business owner doesn't tread carefully, he or she could lose the chance to recoup the lost money. A few months ago, the director of operations at New York promotions company ePromos Promotional Products Inc. noticed that paychecks had been deposited at unusual times into employees' bank accounts. The operations director approached the director of human resources, a recently-hired employee who oversaw payroll systems and direct deposit. Jason Robbins, ePromos's president and chief executive, claims the worker admitted to skimming some money from the company and said some of the irregular checks were a mistake. Mr. Robbins says the person left the office that afternoon and never came back.
Mr. Robbins says he called the police and the employee hasn't been tracked down yet. A New York City Police Department official wasn't immediately available to comment on the case.
Mr. Robbins says he and the director of operations combed through bank and payroll records and he alleges that they uncovered at least $10,000 in missing funds. He claims that when workers quit or were terminated, the HR director left their payroll accounts open and diverted their pay to himself.
John Egan, vice president of operations at Balance Point Payroll, the Glen Rock, N.J., payroll firm used by ePromos, says the former employee called with unusual changes to the company's payroll, including frequent changes to employees' direct-deposit information.
Today, Mr. Robbins pores over payroll reports himself to check for irregularities. "We're a $25 million company – we can't afford fancy stuff" to detect fraud, he says. "As you grow you have to delegate. He seemed super trustworthy."