Stopping Fraud From Ruining Your Business

If you fall victim to fraud in your business it can affect you in various ways; the main one is obviously financial but there’s also deterioration of staff morale, reputation, your financial standing among banks and lenders, and more besides. Knowing what frauds are possible and how to combat them are vital in business.

Focusing on fraud prevention

Small and larger businesses alike can suffer fraudulent activities; indeed smaller businesses can be more at risk as they tend to be less geared towards tackling fraud than their larger brethren.

Technology and procedures exist to help combat fraudulent activities; for example, check tampering is a common fraud in small businesses, but measures can be taken through using tamper proof security checks and other security steps to remove the threat.

Types of fraud

Fraud comes in all shapes and sizes but business fraud tends to fall into the following:

1. Employee fraud

Those ‘on the inside’ can use their knowledge of the company and abuse their employee privileges to commit fraud such as claiming for hours they haven’t done on a timesheet, skimming cash, writing fake checks, stealing supplies and more.

In order to combat this type of fraud the following employee related procedures are worthwhile:

  • Conduct background checks on new employees, especially those who may have financial authority and responsibilities
  • Segregate financial access so no individual employee has access to all financial areas if possible
  • Ideally don’t allow multiple people to write checks; it’s a good idea to have at least two signatories
  • Check activities regularly using spot audits

2. Money handling fraud

If you handle payments such as cash and cards, then employees involved in these should be fully trained in how to spot fake currency, understand what checks to make when handling card payments, and know what signs to look out for when someone is trying to commit credit card fraud – especially if over the phone in ‘card not present’ (CNP) transactions.

3. Inventory control

Poor stock tracking can cause inventory to disappear, so knowing what you should have through using reliable stock control methods is important. Fraudsters have gotten clever with chargebacks, refunds, and abuse of returns so returns abuse prevention is important.

Monitor paperwork regularly to ensure invoices and purchase orders tally with items you should have in stock and elsewhere in your business, such as stationery supplies for example.

4. Systems and IT

Ensure those using the system adhere to safe access methods such as changing passwords regularly, knowing how to spot attempts at fraud such as phishing emails, and spotting attempts by others to gain passwords.

Security training, and regular refreshers, is key to keep everyone aware and thinking about systems security and keeping their knowledge up to date.

Ensure systems are updated with the latest software versions and backed up regularly – and that more than one back up is maintained and easily accessed so you can get up and running again quickly if required.

Fraud Prevention: Regular checks and audits

Keeping on top of fraud prevention is important; in particular regular (but not always at exactly the same times of the month, quarter or year) audits are worthwhile to spot problems before they escalate.

Remaining diligent with paperwork checks and especially around money will all help to protect against fraud. The most recent report into worldwide fraud from the Association of Certified Fraud Examiners (ACFE) shows how fraud is mostly perpetrated and detected.


Leave a Reply

Your email address will not be published. Required fields are marked *