Get equipped with ways on how to prevent fraud in business
The rising cases of fraud have made it essential for business owners to understand how to prevent fraud in the business. If you fail to equip yourself with the necessary business fraud prevention techniques, you might end up ignorantly plunging your business into bankruptcy.
Fraud has taken a new turn as fraudsters are learning more refined ways to dupe people. There is no guarantee that at some point in your life, you wouldn’t come across a fraudster in your business. It is up to you to decide if they will successfully have their way or if you will be smart enough to mitigate the inevitable. From small-scale to large-scale businesses, nobody has immunity against fraud. It is important that you understand how scammers work, predict their moves, and prevent such from happening.
Let me guide you through easy ways on how to prevent fraud in the business.
The first step to preventing fraud is learning how to identify one. There are a lot of fraud schemes out there, but there are some popular frauds that are peculiar to businesses. Here are some types of business fraud.
Seven types of Business Fraud
1. Payroll Fraud
Payroll fraud is one of the most common types of business fraud. Instead of employees demanding a raise in their salary, they pad up the work detail and inflate the figures. They can lie about their attendance at work, overtime, work hours, without a transparent system with verifiable pieces of evidence to counter their claims; you will end up paying an employee more than expected.
2. Email Fraud
Email fraud is becoming a popular type of fraud. Business owners are not exempted. You will receive an email with some ridiculous texts. Hopefully, an invitation to an investment, or a made-up military rescue mission. These scams might engage you into delivering your details, or extorting money from you in ways you don’t know. These emails could contain phishing links or malware that could expose your financial and personal data.
3. Employee Fraud
A lot of employees are all shades of evil. You are pushing your business to bankruptcy if you make the mistake of hiring them. They will inflate your financial records, ship out products, steal money, and calculatingly plot schemes that will enrich their pockets at your expense.
4. Credit and Debit card fraud
All that a fraudster needs to scam you are your card details; CVC/CVV, expiry date, and card number. With the knowledge of your pin, your money is gone.
This is usually carried out by members of your management board. Misappropriation of funds remains one of the reasons why business owners and employers find it difficult to trust wholly. You might end up finding out that the workers you trusted so much were forging the checks, falsifying documents, and editing the inventory to meet their needs.
6. Money Fraud
In cases where your customers can purchase items with cash, a customer could use fake money to purchase real items. This leaves you on the losing end.
7. Return Fraud
In the case where you offer a money-back guarantee, or a return policy, a lot of customers will abuse this opportunity to use and return items. You will run into customers that will come with stolen items or products that they never bought in your store. They might even come back to change a product that they damaged themselves.
It is essential that just as you have become knowledgeable on how business fraud works, you should also understand how to prevent it.
How to prevent fraud in business
1. Be Smarter than the system
One of the ways that you can prevent business fraud is to be thorough and skeptical of the system. You must understand that you will only become a victim of fraud if you fall for their antics. You must build the attitude of crosschecking every business-related issue that comes to your table; deals, partnerships, offers, transactions, etc. Do not append your signature until you are sure of what you are doing.
2. Practice a decentralized business structure
One of the reasons why employees pull off successful business frauds is because they are made the central seat of control. When business activities are handled from one source, when that source is corrupt, it will become difficult to spot the loopholes. Make sure that your business’s managerial duties are separated, split the financial duties amongst different staff. Have one person record the inflow of cash, another person records the outflow of cash. Ensure that the internal control and management of the business are not handled by one person. You can include the use of an auditor to oversee all decentralized financial affairs in your business.
3. Review Regularly
Nothing keeps your business safe than when you also review your records. If you order some new goods for sale, keep your records, just as your cashier will do the same. At the end of the day, try to match their records with yours. If the dots are not joining, then surely there is a fraud going on. Always review paychecks, balance sheets, accounting records. It is important that you do the final review yourself and not delegate it to someone. This assures you that your business is still under your control.
4. Know your employees
This might sound like a difficult task, but do not hire an employee without doing some background checks on them. It is a risky venture that you wouldn’t want to be on the losing end. Make some calls to their former employers, get to know if they have any record of malpractice. You must only entrust your business into the hands of people with integrity and high business ethics.
5. Do not reply to strange mails
As a business owner, you should expect some mails with juicy offers, ignore them. There is a high probability that those emails include phishing links that will compromise your safety and release your personal and financial data.
6. Sensitize your staff on anti-fraud and fraud prevention techniques
One of the ways to prevent fraud in business is by teaching your staff how to notice fraud. This will include how to identify counterfeit money, how to spot criminals, what to do when there are credit card issues. Host regular work meetings and seminars to drive home the communal spirit of anti-fraud. You can also mount some CCTV cameras to ensure that nothing goes unnoticed