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Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Adam Hennen
December 2014-January 2015

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Fraud Protection – When it comes to fraud, a strong defense may be best offense

Companies both large and small strategize constantly on ways to grow their business, reflecting on the company’s pricing model, their footprint in the marketplace and their sales volume with existing customers.

All of these are undeniably crucial for strong business growth. But what if we took a step back and approached the growth concept from a different direction? What if we considered a stronger defense as an offensive strategy? Now hold that thought: we’ll be changing direction for a moment.

The typical organization loses 5 percent of revenue each year to fraud. The losses caused by fraud go straight to the bottom line because you’ve already incurred the cost of sales on those losses. So for the average company with $10 million in sales, that’s $500,000 taken straight off the bottom line.

To counter the impact of fraud, the sales team would have to drum up an additional $1,250,000. That’s on top of the 10 percent sales growth you are hoping to experience, increasing your total sales to $2,375,000. Bring that up at your next sales meeting, and there’s no doubt you’ll get your team’s attention.

So back to offense and defense. What if, instead of over-exerting the sales team, you implement some simple, affordable and effective defensive strategies that make the probability of fraud occurring significantly less likely. Here are some things you can do to make this a reality:

No. 1, implement a hotline. A hotline is a means of communication that allows your employees to report suspicious activity that might be fraudulent or indicative of abuse within your company. Over 40 percent of frauds are detected by tips, and most of those tips come from employees. Statistics show that companies with hotlines experience frauds that are detected 50 percent more quickly and are subsequently 41 percent less costly. More importantly, the hotline can be as simple as a phone number, which should cost the company very little to activate.

No. 2, demonstrate good governance. A company that presents itself as the type that doesn’t care about employee theft and abuse is more likely to experience employee theft and abuse. The odds are good that you already have an existing employee handbook. If so, make sure it has a policy on fraud and abuse and then take the next step in making sure that your employees know there is a policy on fraud and abuse.

Hold a special training session to review the details of your policy, and emphasize the importance of employee compliance. If you don’t have a fraud policy, spend a few minutes on the internet. There are plenty of examples that you could customize and easily implement. But most importantly, take time to communicate the policy company-wide. Consider including vendors, customers, owners and board members in that communication process.

No. 3, implement an effective management review. Many companies have already designed a review process but fail to properly execute it. An example of this is the ability of the company’s accountant to use an executive’s signature stamp. If your company has one of these, you might as well make the accountant an official check signer. At least then they’d be applying their signature to the fraudulent check instead of yours.

Management review procedures are designed for a reason. While they may take time away from doing more desirable tasks like reading e-mails, they also send a message to other employees that their work is not going unnoticed.

No. 4, restrict access to the accounting software. Similar to segregation of duties, you want to make sure that your sales department can’t access the accounting functions of your company’s software. Likewise, your accountant should not have access to changing a sales order. Most software has the ability to limit access to appropriate individuals. If you haven’t taken advantage of that function, it’s time you do.

No. 5, force your employees to use their vacation. A person committing fraud will seldom want to take a vacation day so as not to risk their fraud being discovered. Make sure your employees use their vacation, and if you experience hesitation on their end, you should be skeptical.

Everybody feels that if they weren’t there to do their job, the company would probably fail. In reality, with proper planning, job duties can either be temporarily handed off or put on hold for a few days without significant consequence. Investing dollars into fraud prevention is a difficult thing, because the return on investment is hard to measure.

Yet understand this: if you invested $10,000 to fine-tune your organization’s fraud prevention practices and that investment reduced your fraud risk by 10 percent, your $10 million sales company just added $50,000 back to the bottom line—or $125,000 to the top line.
Using defense to assist the offense is a strategy not always considered, but it’s definitely one that should be thrown on the table.