Preventing Business Fraud
Do you know what is no fun at all? Root canals, parking tickets, being seated exactly eight seconds after the end of happy hour, and fraudulent activity within your business!
Many business owners like to think that they’d know if their business were susceptible to fraud.
After all, they think, I know everyone who works here, and I don’t hire shady characters.
As it turns out, this is the exact logic that can get a business into trouble. That’s because small businesses are uniquely vulnerable to fraudulent activity. The per-employee losses in the smallest businesses are 100 times the amount of their largest counterparts.
A good rule of thumb: consider 5% of your revenue gone via fraud. Yes, we said 5%.
Shocking? It should be.
Know Your Risks
Lack of risk awareness is one of the biggest and most easily solvable problems.
Fraud is rarely committed by the people you’d think. Most fraudsters don’t wear orange jumpsuits; they wear sweater sets and sensible shoes. It is often older employers, managers, someone you trust implicitly, and that is exactly how they get away with it.
You might ask, “how can my most trusted employee defraud me?” Fraud isn’t always malicious. Often, it’s a good person in a tough situation — and this economy isn’t helping. Fraud happens when pressure, opportunity, and rationalization coincide.
Cash fraud is most common, and fraudulent disbursements are the most common form of cash misappropriation. This means false invoices or forged checks.
How do you prevent fraud? First, you need an excellent fraud policy. Then you need to enforce that policy. This means vigilance and follow-through. Internal controls and separation of duties are your best defenses.
Need more information? Give us a ring — we are ready to help you with your business needs and separation of duties.
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