Keep your business safe from occupational fraudsters.
For small businesses, it is a tough jungle out there – especially since they are highly vulnerable to fraud. According to a study conducted by the Association of Certified Fraud Examiners (ACFE), 28.8% of businesses in the US, which employ less than 100 employees, have been victimized by fraud. The average loss suffered by these companies amounted to $154,000. Larger companies suffer lower losses (average loss amounted to $128,000) because they usually have the proper measures to detect fraudulent activities sooner.
The same study also reported the following findings:
- In 77% of the cases, fraud was committed by individuals working in one of these departments – accounting, operations, sales, executive/upper management, customer service, purchasing and finance.
- Corruption schemes, billing schemes, check tampering, and skimming represent the top fraud schemes in small, medium and large organizations.
- Most fraudsters are first time offenders. 87% had never been charged or convicted of any related offense while 84% had never been punished or terminated for fraud-related conduct.
Since there is an increasing trend in fraudulent practices among small businesses, take some precautionary steps to protect your business. Here are some preventive measures that can help reduce the possibility of losses through embezzlement.
Do a background check. Since the future of your business is at stake, do everything you can to protect it – and this includes checking the background of prospective employees. You can either make a few phone calls or write a few letters to check their references, or ask the credit bureau to do a thorough background check before hiring anyone.
Divide and switch. Never allow any one person to have control over the entire accounting process (or any other transaction for that matter). There should always be a division of duties, and consider switching roles regularly. This will significantly reduce your risk of being embezzled. Also, provide cross-training for your employees.
Keep an eye on what’s going on. Make unannounced trips around your workplace, build up rapport, and get to know your employees better so you can easily detect an impending problem sooner.
Keep track of petty cash and unused checks. Remember, fraudsters usually start embezzling funds by taking small amounts so check your petty cash on a daily basis. Verify all check numbers to make sure no one takes a check and writes it for himself.
Be vigilant. Institute measures that can help you thwart any embezzlement plots. Consider preparing the daily cash deposits and check the deposits against the record of cash and checks received. Reconcile all bank statements with your company’s books and records and do a routine spot check in all critical aspects of your operation to make sure everything is going smoothly.