There are many different ways that small businesses lose money, but fraud is by far the most common. Fraud refers to the act of concealment of the truth or omission of material facts, causing one to act to his own detriment. Small businesses are more vulnerable to fraud, since they lack the resources they need to implement internal controls.
There are different types of fraud including:
• Contractor fraud
• Customer fraud
• Insider fraud
In business, one of the most common types of fraud is insider fraud and accounting fraud. This involves employees writing fake checks to themselves, skimming cash and taking company supplies. Even though fraud is common, there are certain steps that a small business owner can take to reduce the chances of fraud.
Conduct Employee Background Checks
It might seem obvious, but not all business owners check the background of potential employees. This can be the number one fraud prevention practice. This is especially important for employees who will be handling cash or sensitive financial data. This screening process will help you identify candidates who are right for your company and those that you should think twice about.
Educate Your Staff
While your employees represent your most vulnerable area, they are also your first line of defense against fraud. It is therefore important that they learn the basic security threats in your line of business and the prevention measures. You should conduct training sessions for both the new employees, as well as the seasoned employees. Revisit your company’s rules on how to handle confidential information.
When it comes to fraud, time is precious. What does this mean? It means that the sooner you identify fraud, the faster you can report it and the less amount you stand to lose. If you reconcile your accounts often, whether weekly or monthly, there are higher chances of identifying the irregularity. It is therefore recommended that you hire a trained and experienced accountant to assist you with the reconciliation. They are able to perform the reconciliations on a daily basis, saving you hard earned money and precious time.
Hire an Independent Accountant
Having an independent accountant handling your books is one of the best things that you can do for your small business. Outsourcing the accounting function can assist in fraud prevention. Since they do not have a hidden agenda in your business, you can be sure your books are in great hands.
Many small businesses close shop due to fraud. Do not be one of them. If you have a reason to suspect fraud, act fast. The faster you act, the faster you sort out the problem and the faster you can get back on your feet. Contact the fraud experts at Bodine Perry at (855) 851-8318 or visit www.bodineperry.com.