Anyone charged with running a business knows just how difficult it can be to recover from being victimized by fraudulent behavior, and it is quite evident that the damage that is subsequently inflicted can have a serious and long-lasting impact on both a company’s reputation and its bottom line. While owners, managers and any other professional holding a position of leadership within a company should understand how to mitigate the potential damage caused by fraud once it has occurred, it is far more important that any strategy for addressing fraudulent activity includes a thorough and effective preventive maintenance plan.

A company like 1 Stop Maintenance serves as a perfect example why active prevention is preferable to passive response. Rather than waiting for an issue to arise before correcting it as quickly as possible, companies in all industries are better served by preventing the circumstances in which fraud occurs while also maintaining a sense of vigilance regarding the possibility of fraud. Through the implementation of strategies similar to those utilized by One Stop Maintenance in serving clients, businesses stand a much better chance of preventing fraud or at least identifying an issue before it devolves in a significant manner.

In order to develop a preventive maintenance plan, companies should first focus on accomplishing each of the following:

• Develop a clear understanding of the circumstances leading to fraud
• Use internal accounting practices to recognize and prevent fraudulent behavior
• Make a commitment to being vigilant and consistently observant

These simple strategies will make it far less likely that a company is adversely affected by an act of fraud, but it nonetheless remains possible that fraud can still take place. The key is to prevent fraud as often as possible and then to limit the damage when prevention is simply not possible.

Understand the Circumstances in Which Fraud Occurs

The most critical strategy for fraud prevention is to simply understand the circumstances in which fraud is most likely to occur. Once these circumstances are identified, it is much easier to create a detailed plan that focuses on eliminating these conditions to the greatest degree possible. Not only does this reduce the possible forms of fraud that could be used against a company, but it also serves as an effective deterrent to fraudsters looking for a broad range of options in which they can carry out a strategy for deception and theft.

Utilize Internal Accounting to Recognize and Address Fraudulent Behavior

Internal accounting is a vital department for a wide variety of reasons, and there is little doubt that it is often the most essential department when it comes to fraud prevention and early detection. Through the use of regular inventory checks and audits — not to mention daily cash reconciliation and financial statement review — fraud can be quickly and effectively addressed in a manner that results in the reduction of any potentially negative impact on the business.

Of course, there are additional strategies that should be employed either through the use of or in conjunction with internal accounting that can further reduce the likelihood of fraud negatively affecting business operations. Again, many of these strategies require a thorough understanding of the circumstances in which fraud may occur or eventually develop. Many business leaders have enjoyed a great deal of success through the establishment of a clear code of conduct that is specifically designed to discourage the conditions ultimately leading to fraudulent or unethical behavior. This requires those in leadership positions to walk a fine line in establishing a code of conduct that is effective but not so restrictive that employees feel a sense of alienation.

Most professionals in leadership positions would agree that the key to implementing a code of conduct is to take the time to clearly delineate the specific rationale behind each aspect of the code. It should go without saying that the code itself should be founded on sensible guidelines that are clearly designed to protect the company against fraud and unethical behavior.

An employee may not immediately understand, for example, why they are not allowed to accept a sample from a vendor without paying for it and may therefore jump to an incorrect conclusion regarding the rule. When this guideline is explained as being in place to prevent the kind of circumstances that allow a vendor to exert undue influence –- intentionally or otherwise — and may eventually lead to fraudulent behavior that harms the company, employees and team members become much more likely to adhere to the code of conduct due to the simple step of offering a sensible and honest explanation.