![]() Take these proactive steps to protect and ensure the financial health of your company. Many companies that are victims of fraud never recover their losses and are pushed out of business. This includes conducting background checks and verifying references for every single hire. It’s important to have strong hiring practices in place that can weed out people who may put your company at risk. The ACFE reports that more than 40 percent of fraud cases were initiated because of a tip, and employees accounted for nearly half of all tips that led to the discovery of a fraud. You can’t be everywhere, but a culture of open communication and trust-building in your business can go a long way to prevent-or reveal-fraud if it happens. Regularly sharing the financial state of your company can help them help you maintain the business you’ve worked so hard to build. A healthy business means job security for them. Your employees have a stake in your business, too. Practice open book management with your staff.In addition to these three primary actions, there are culture adjustments you can make to minimize the opportunity for fraud: Knowing what your business's cash flow should look like can help you more easily identify red flags you can investigate should they occur. If this sounds like you, try a hands on approach instead: Create a cash flow budget, and monitor it weekly to ensure nothing out of the ordinary is happening. This “hands off” behavior can set the stage for fraud to occur. Owners delegate the responsibility to “someone they trust,” perhaps even a longtime friend or family member, and wash their hands of cash flow discussions at the detail level. That’s one of the reasons fraud can take place more easily in a company. Many small-business owners find dealing with the cash side of the business an unpleasant experience. And never allow the person who manages your finances to be the auditor.ģ. However, at least once per year, you should do a surprise audit. Watch for irregularities or anomalies that can disclose a bigger problem. ![]() At the very least, you should monitor the reports in your accounting software that reveal audit trails of transactions taking place. You should conduct regular audits on your books at least once per quarter. For a dose of added protection, make sure all employees take mandatory vacations: People who steal don’t like to miss work for fear of being discovered.Ģ. For example, you should require two signatures on checks, instead of just one. You also need to put added controls in place for the cash that flows out. You need to implement a division of duties, where responsibility is shared by different people in your company. When it comes to your business's cash, there should never be just one person managing what comes in and what goes out. The good news is, you can prevent fraud in your small business by taking some key actions and implementing controls to ensure your business doesn't fall victim to fraud. "A longtime office manager for a Lewiston medical practice allegedly embezzled over $100,000 from her employer." - The Buffalo News Don't Become a Victim "Federal prosecutors say a Northland woman embezzled nearly $3 million from the sheet metal company that employed her and banks that supported it over a decade, enriching herself and bankrupting the company along the way." - KSHB Kansas City Stories of fraud, like the two below, can be a wake-up call for your business: But some fraud can go on for years in a company. The ACFE reports the median duration of fraud, from the time it begins until it's discovered, is about 18 months. Even more alarming is the fact that the smallest organizations tend to suffer disproportionately large losses due to occupational fraud.Īnd don’t think your company is somehow exempt-it can happen in pretty much any company, and it’s not something that’s typically discovered overnight. Do a quick search for "embezzle," and you’ll find plenty of reasons to worry about the risk of fraud for your business.Īccording to the Association of Certified Fraud Examiners' (ACFE) "2014 Global Fraud Study," the typical organization loses 5 percent of revenue each year to fraud.
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