It does not matter how big or how small your business is, or what industry you operate within, your business is susceptible to fraud, Fraud is something that can devastate a business.
Businesses lose an estimated 5% of their annual sales as a result of fraud committed by staff, administrators, owners, and executives, according to research by the Association of Certified Fraud Examiners (ACFE).
Fraud is something that should not be dealt with once it has hit your business. It needs to be something ongoing and something that every business needs to be proactive about to avoid it becoming an issue in the first place.
What is fraud in business?
When an individual or an enterprise performs fraudulent and illegal actions for the purpose of gaining financial gain, it is known as business fraud. Business fraud is often concealed and disguised as a legitimate business transaction.
Since fraud is such a significant issue – one that may even lead to the fundamental collapse of a previously prosperous company – it is critical to tackle it aggressively.
What are the different types of business fraud?
There are five main types of fraud that can have a serious impact on your business. These are:
Identity theft: A con artist may steal your company's identity and use it to gain access to your credit. Your financial statements could be manipulated by fraudsters. They might be able to get this data directly from your computer.
Payroll fraud: This is more common in small businesses, but it can happen in any size company. Employees can request paycheck advances and fail to repay them. They can even fabricate work hours or have coworkers clock in and out for them. Payroll fraud can be avoided by using a payroll service that allows you to authorize everyone's time before they are paid.
Counterfeit money: It is possible that your company would be given counterfeit cash. There is undoubtedly more fraudulent money in circulation than you would ever realize. It is important to be able to recognize the difference between real and fake money so that you can refuse to take it and report it to the authorities.
Check fraud: Check fraud is a criminal act that involves the unlawful use of checks to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership. It’s important for your business to have check fraud prevention to protect your business.
Fake returns: If you sell goods, customers can purchase items, use them, and then return them, even if the items are in perfect condition. Return fraud can be reduced by requiring a receipt and enforcing strict return policies.
Employee compensation: Worker's compensation insurance is required by law for all business owners. If the workers are injured at work, this scheme will cover them. To help deter this form of fraud, companies should remain on top of safety and what happens in the workplace. You should also verify that if an employee claims to have been injured at work, the accident actually occurred there.
How can you avoid fraud in your business?
Carry out background checks on your employees before hiring them
Small businesses rarely conduct background checks on prospective hires, putting the company at risk of attracting hackers, predators, and even convicted criminals. Conduct a rigorous background check that goes back a minimum of seven years to see if an employee has a criminal background. Of course, a clean background check doesn't mean that an employee couldn't then decide to commit fraud. Should this be the case, and they then decide to flee to avoid being found, you could get in touch with a private investigator to help find them. BondRees reckon that you can Find anyone with our Tracing agent, so this could potentially be a good place to start if you find yourself needing to track a fraudster down.
Run credit checks
If your employee has any access to financial resources or records, make it part of the terms of the contract that you will carry out a credit check before taking them on or moving them to a new position. While poor credit does not mean they are going to carry out fraud, financial difficulties can lead people to do desperate things.
Carry out regular computer audits
Regular, unannounced computer checks carried out by computer forensics specialists can flag any suspicious activity on an employee’s computer. Don’t forget to look at any other devices that they have that they access company information and records on, and stop them from using personal computers or devices for work purposes unless they are prepared for them to be audited as well.
Carry out social media checks
Again, make it part of your employment agreement that you will periodically check their social media profiles to make sure they are not posting things that could be potentially damaging to your company. Of course, if their profiles are completely locked down, there is not much that you can do, but you can check anything they post in public forums and groups and see if they have posted anything that bad-mouths any former employers. If they have, be aware that there is a chance they could do it to you.