While many people think that fraud only happens in large corporations, studies have found quite the opposite to be true. Small and medium-sized businesses are at a higher risk and the effects can be more damaging. This is largely due to the fact that they’re usually less equipped to prevent and deal with fraud.
Fraud comes in many forms; including asset theft, misuse of finances, phishing and pharming. According to the Association of Fraud Examiners, the majority of fraudulent activity involves the theft or misappropriation of assets. Of course, some small business owners struggle with this as their employees can feel like close friends or even family.
That said, preventing fraud in your business is by no means impossible and is a crucial step to ensuring your long-term survival. Here are some effective ways to reduce the risk of your business being a victim of fraud.
Separate Staff Duties
It would be wise to prevent single employees from having control over multiple duties, especially in the financial department.
At the same time, performing independent checks, such as audits and inventory counts, will serve as an effective deterrent. If your employees know that their actions are overseen, they’ll be less likely to be dishonorable.
Invest in Expert Help
While a lot of fraud happens within the business, it can also happen to you online through methods such as phishing and pharming.
Investing in brand protection for your business will help you avoid being victim to these modern threats. A good brand protection solution will offer incident response, digital threat mitigation and forensic threat analysis services.
Stay in Control
Financial data such as general ledger balances and account reconciliations should be controlled by the employer.
Keep the responsibility of overseeing this information to someone outside your business, such as an independent accountant. This will ensure that any inconsistencies will be detected and reported.
Make sure in both written and verbal form that there are serious consequences to dishonest acts in the workplace.
This doesn’t necessarily have to be performed in a harsh way. As long as your employees know, fraud will be more difficult to rationalize as they know their acts will not go unnoticed and without penalty.
Train Your Employees
Aside from raising awareness around the consequences of fraud, consider training your employees on fraud detection skills and the process that should be followed if they notice suspicious behavior. Be sure to create a code of ethics where these aspects of the workplace are detailed.
For every case that does arise, you should ensure that it’s followed up on, regardless of size.
Even the smallest act of dishonesty can lead to a false sense of comfort that results in more dishonest acts in the future. Once you have these methods in place, preventing and detecting fraud won’t come as a challenge.