Feeling the Pinch

Figures released by BDO Stoy Hayward at the beginning of the financial downturn suggested that employee fraud was on the increase and that it was expected to rise further and cost the hospitality industry up to £77 million over the next 12 months. As job security declines people are more likely to take a risk with the company's finances rather than their own. If you can remember the last recession you might also recall how theft of stocks and cash soared. When recession hits, profits are squeezed and all too often proven protocols are overlooked or ditched in favour of short term savings, which always prove to be a false economy. Unfortunately this ultimately only serves to increase the likelihood of business failure. Alternatively, Compliance Audit can help you survive and thrive, take advantage of unique opportunities that arise in difficult times and be best prepared to succeed when the upturn begins. How can you stop the pinch from within? Without doubt the best operational practice to ensure that a business is not suffering from employee fraud is to conduct some form of Compliance Auditing. It is no coincidence that the best run, best managed and most profitable businesses always adopt some form of Compliance Audit. After all, prudent financial management doesn't happen by chance, but by having disciplined structures in place a business can prevent loss and the kind of cash and stock haemorrhage that can lead to financial ruin. This is where compliance auditing can be invaluable. It should if constructed properly always be self financing and indeed can often pay for itself many times over, particularly in the case of large multi-site operations where keeping control of every facet of the business is increasingly difficult. "80% of sites audited since October 2008 for one of our client's, failed the basic question – Is all the cash that should be on site, currently on site?," reported Malcolm Muir, head of consultancy at Venners Auditors. "The reasons for these cash losses were varied but all pointed to failure to follow company guidelines which ultimately lead to a mixture of illegal loans, theft and poor accounting" Some of the stranger events Venners have recently found include a manager awarding himself a pay rise by embezzling a set amount of money each month after not receiving the pay award he felt he deserved, a number of managers who have 'stored' the house float in their own bank accounts (for safe keeping of course) and even some who have installed their own gaming machines and tills into a unit. Muir said: "Only a site visit would have spotted these offences, and as a compliance audit conducted by an external company is totally independent, the client can be assured that they will receive all of the relevant information from the visit and not just the information that makes life easier for an area manager or the like." The Compliance Auditing process developed by Venners checks the procedures that most expose a company to risk. All too often unit managers see an opportunity to cut a corner or save a bit of time and nearly always to the overall detriment of the business. A scored modular process is adapted for each customer helping them to quickly identify a site that is at risk of losing profits and reputation for the company. The compliance audit is also flexible enough to focus on any particular aspect the parent company requires. For example, if your Personnel Department is having a drive upon a payroll data, the auditors can quickly let you know how it has been received and actioned on the shop floor. Muir concluded: "The biggest benefit of compliance auditing is more money in the bank, plus the comfort of knowing that the most important aspects of running a good, well managed and legislative compliant business are being tested and reported on a regular basis. Now more than ever, look after what you have already got. As Warren Buffet once said "Rule 1 – never lose money. Rule 2, never forget rule 1