The number one best solution to fraud prevention for small businesses is an anonymous tip hotline. A recent study conducted by the American Institute of Certified Public Accountants (AICPA) showed that 59 percent of forensic accountants believe internal whistle-blower hotlines are the most useful investment a business of any size can make to deter fraud.
What is a tip hotline?
A hotline is a safe place that people can call to report violations about your company practices or employees. The Association of Certified Fraud Examiners (ACFE) recommends EthicsLine for confidential reporting 24 hours a day, year-round. Other companies such as Fraud Hotline offer yearly packages for small businesses and non-profit organizations for $500 or less.
Why is a tip hotline important?
Since the Sarbanes-Oxley Act of 2002, public companies must implement fraud reporting to be compliant with federal regulatory requirements to receive and track complaints. Private companies are utilizing them as well as an inexpensive and effective method for preventing fraud.
Not only does a tip line show fairness in an organization, it can help a company defend against lawsuits. Implementations of tip lines have been shown to diminish the time of existing fraud schemes by 50 percent or more. According to a 2012 ACFE study, almost half the tips come from employees, but another 17.8 percent come from customers. Vendors and anonymous callers make up the next largest reporting segment with 25 percent of the reporting between the two of them.
What should you look for in a tip line?
Shopping around and finding the best fit for your business is key. There are many questions to ask:
-Does the organization need multilingual services?
-Does the tip line need to be 24/7/365, or can it match business hours.
-Will there be toll-free operators, or message systems?
-Can input be accepted by email or fax?
-Is there case management, and resolution of each report?
-Is there a location where someone can speak to a live person?
-Will there be anonymity? (Studies show lack of anonymity affects peoples’ willingness to report.)
Although tip lines that include in-person services and case management cost significantly more than web or cloud-based options, they’ve been shown to strengthen a company’s legal standing in the event of a lawsuit.
Every organization decides what sort of tip line works best for them. However, even if the company chooses to start small, having any tip line is better than having none at all.
Contact us for more information on preventing fraud.