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As a business owner, it’s crucial to be knowledgeable about fraud. After all, you’ll (hopefully) be earning large sums of money and managing them. Unfortunately, some malicious elements out there will feel tempted to help themselves to these fruits of your labors. These people could be working for you. They may not even have anything to do with your business at all. But either way, you should be knowledgeable about how to protect your business from fraudulent activity.
Fraud and Its Potential Impact on Your Business
Financial fraud is the obtention of money or other assets from you by someone using either deception or criminal activity. Not very nice. There are different types of fraud, such as:
- Skimming, in which a person in the business accepts cash from a customer but doesn’t record the sale.
- Non-cash fraud, in which someone steals inventory or confidential information and turns it into cash.
- Check fraud, in which someone steals company checks or outgoing vendor checks and pays them to themselves.
That’s just a small selection. Business owners should be on their guard.
As you can imagine, fraud can have a range of undesirable effects on the business. Of course, there’s the (potential) major loss of money or other important business assets, not to mention a possible loss of the business’ competitive advantage. Then there’s the damage to the business’s reputation, as it can struggle to retain clients or attract new ones. The fraud could also expose the business to potential sanctions, fines, and regulatory costs, depending on the type of fraud committed.
When it comes to protecting your business against fraud, there are several important things you need to know:
1. Conduct An Audit
The best starting for protecting your business against fraud is to conduct a fraud risk assessment. This audit will help you to detect the areas where your business is at risk of fraud and provide recommendations on how you can mitigate these risks.
2. Use Secure Checks
If someone gets their hands on the company’s check book, they’ll start using it to splash out on expensive treats at the expense of your business, or they may even try to create counterfeit checks. Fortunately, it’s possible to invest in secure checks specially designed to be resistant to fraud so you can protect your business.
3. Know Who Your Customers and Suppliers Are
Knowing who you do business with, whether it’s with a supplier or a customer, will help you spot any transactions that seem fraudulent (or are so). You should also do your due diligence and check the customer and supplier details you have on file, plus online searches.
4. Train Employees in Fraud Detection
Employees are often the first people to spot fraud, so train them to recognize any instances when something isn’t right. Training your employees in fraud detection could save you a lot of money. Small businesses are especially vulnerable to fraud because they tend to lack anti-fraud controls.
5. Understand Your Finances
Good financial management isn’t just important for making decisions that could cut costs or increase the profitability of your business. It can help you detect fraud. As a business owner, you should understand how money enters your business and leaves it. Always check your bank statements and understand methods of payment, who has the authority to issue payments and who checks that the payments are legitimate.
6. Protect Your Property Online and Offline
Keep laptops, phones and other tech equipment secure. Take out business insurance to cover these items if anyone steals them or manages to compromise them. It’s sad but true that people will also try to steal from you online, so protect your business against cyberattacks. Make sure you back up any systems.
Fraud is an unpleasant risk business owners must face. If they take the right action, however, they can protect themselves against it and minimize any losses incurred as a result of fraud.