Stop Fraud at the Front Desk

Small businesses often rely on a few trusted employees to be the first people customers encounter — not to mention, the primary ones to collect payments and sensitive data. For example, the front desk is usually the nerve center for dental offices, fitness studios, small hotels and retail boutiques. Although front desk employees can build loyalty by offering customers and clients a smile and immediate service, ethically challenged workers may use these positions to steal. Here’s how these ploys work and ways to prevent them.

Common schemes

Payments, scheduling and customer interactions often happen at the front desk. Minor lapses in oversight, combined with workers bent on committing fraud, can lead to financial losses. Common fraud schemes include:

Cash skimming. This involves underreporting sales and pocketing the difference. Warning signs include mismatched totals or excessive no-sales.

Refund and void abuse. Here, an employee might process false credit card refunds to friends and family members — or even themselves.

Fake discounts or free services. Crooked employees might extend markdowns or complimentary services to people they know. Customer visits without corresponding sales transactions may signal fraud.

Appointment manipulation. This applies to “ghost” appointments or false cancellations that enable perpetrators to hide missing payments or pocket deposits. Appointment activity with no corresponding increase in foot traffic may indicate appointment book manipulation.

Such schemes can flourish when a business places excessive trust in employees, lacks automated point-of-sale and scheduling systems, or fails to segregate tasks involving money and recordkeeping. Frequent cash transactions and reliance on paper (vs. digital) records generally make it easier to perpetrate fraud. Also risky: scant owner or management oversight and infrequent account reconciliation.

Simple prevention methods

Fortunately, effective internal controls don’t require expensive software or new staff, simply a few consistent and well-thought-out habits. For example, you should require supervisor approval for all refunds, voids and manual discounts. That said, don’t ignore the possibility that a supervisor might be colluding with a front desk employee. Unusual increases in the number of refunds, voids and discounts should be investigated.

You might also set transaction limits for the number and amounts associated with specific employee logins. And, when one employee accepts customer payments, another employee should reconcile end-of-day totals. If you don’t have the staffing to segregate these duties every day, doing so on a part-time, random basis can still help reduce fraud risk.

In addition, use technology you already own or invest in inexpensive upgrades. For example, consider producing daily automated reports from point-of-sales and scheduling systems. Or you could place security cameras near your front desk to let employees know that management is watching. Finally, enabling activity alerts on bank and merchant accounts allows you to view questionable transactions in real time.

Controls protect everyone

To help ensure your fraud prevention measures are accepted, explain to employees that internal controls are designed to protect both them and customers from fraudulent activity. Then reinforce your policies through short, periodic staff meetings where you recognize employees who catch errors or deceptive customers.

If you suspect a fraud scheme involving your frontline employees — or anyone in your business — contact us for help. We can also help assess your company’s anti-fraud controls, identify vulnerabilities and suggest cost-effective ways to safeguard your assets and bottom line.

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