Fraud is one of the biggest threats out there – whether you are a blue-chip company or a solo entrepreneur. This intentional misrepresentation or concealment of the true facts has the potential to cost your business big money, and the sad truth is that the act of fraud is all around us in many forms. It can take the form of omissions – not relaying the full facts in order to make a gain – or commission, where something is stated that’s an outright lie.
Usually classed as a civil crime, some larger examples can cross over into criminal territory when a loss has been incurred, but the effects of the fraud in causing that loss must be able to be proven – and a lot of it is so insidious or subtle that it either never gets detected or it’s hard to prove that loss.
Businesses are far more likely than individuals to be subject to it, as they deal with a larger volume of transactions open to abuse on a daily basis. From issues with how to verify your customer’s identity to fraudulent applications from employees, there are many areas to be vigilant.
Channels to Guard Against
Insider fraud can be rife, even in small businesses, a lot of whom fall victim to the theft of assets and deliberate accounting errors – sometimes referred to as embezzlement. Skimming some cash off the register, exaggerating a claim on company expenses or even taking supplies can all be alarmingly common. Many customers also practice fraud – from acts they believe are ‘harmless’, such as falsifying a reason to return an item for a refund or credit, to larger acts such as using false account details when making a purchase. Your vendors and suppliers also have the opportunity to act negatively by overcharging on invoices, not completing specified work while still claiming for it or inventing things to charge for.
Prevention Can Be Simple
The steps you can take to protect your business don’t have to be difficult. Making sure that you conduct thorough background checks on all employees and suppliers is absolutely essential – it can take a little more time, but don’t be tempted to skip it. In small businesses especially, it can be that all financial responsibilities are undertaken by one person only, which leads to conditions ripe for fraud, so always make sure to separate out the different duties to act as a safeguard. Try and retain overall control from signing off all transactions if possible, so employees and suppliers know that their actions will be seen by someone else.
If you don’t have them in place, set up stringent policies for the control and management of data – this is your legal responsibility also. Strong inventory control policies will also help to minimise stock loss if this is a problem and you should retain an overall knowledge of levels. A surveillance system can also be an effective deterrent to any bad behaviour. And make sure that you spot check all invoices and orders to pick up on any unusual items or patterns that may point to problems.