Small businesses are always at the risk of failure. While poor cash management is one contributing factor, the real culprit is internal theft. Thus, fraud prevention for small businesses should be a top priority.
Crimes vary from simple cash register skims to sophisticated embezzlement that siphons off capital for months, potentially years.
The Association of Certified Fraud Examiners “Report to the Nations on Occupational Fraud and Abuse: 2014 Global Fraud Survey” indicates that the typical organization loses 5 percent of revenues each year to fraud. The median loss due to embezzlement was $130,000.
The report found that the smaller the business, the more disproportionate the loss. Why? Smaller business tend to shirk on anti-fraud controls. As a consequence, cash and funds sneak out the back door, vital business revenue is stolen, and the business faces tremendous loss.
It’s often the case that by the time fraud is discovered, it’s too late. Forensic accountants arrive long after a significant amount of money has been siphoned off, costing businesses dearly. However, they should still be utilized. According to the report, organizations that implemented proactive fraud prevention measures resulted in losses 60 percent smaller and schemes 50 percent shorter in duration than organizations that did not implement fraud prevention measures.
“Small businesses face a unique set of challenges when it comes to detecting and preventing fraud,” says James D. Ratley, president and CEO of ACFE, adding “Losing … money to employee theft is an expense many small businesses just can’t absorb. You rely on the trust of your employees to make your company successful. But how much trust is too much?”
Considering that small businesses don’t have money to burn, the extra cost of lifetime protection seems like a good investment. There are also ways small businesses can protect themselves, including:
- Conduct background checks on all employees
- Write-out and implement a code of ethics
- Divide bookkeeping and bill payment authority
- Deliver unopened bank statements to top management
- Develop a reporting mechanism or hotline for possible fraud
Keep in mind that the vast majority of fraudsters are first timers, often working with a company for years before they start to embezzle. While a background check won’t predict fraudulent behavior, you should always proactively monitor and understand any risks or warning signs.
To learn more about fraud protection for your business, feel free to contact ProPay. Call 888-227-9856 or email firstname.lastname@example.org.