Unfortunately, a lot of people in the world of business have been victims of various frauds. According to recent studies, almost half of small businesses experience fraud at some point in their business endeavors. And an average fraud can cost a business around $114,000 which is a large amount of money, no matter what kind of business you’re running. Therefore, it’s very important that you know how to recognize a potential fraud and protect yourself and your business from it. That’s why we’ve come up with a list of 4 most common types of fraud you should be on a lookout for.
Double checks
If you don’t want to become a victim of a fraud you have to be very careful about what your employees are doing. This is particularly true for staff members who deal with your books and money. Fail to do so, and you’ll end up like many entrepreneurs who had to shut down their business simply because their employees stole from them. How? Well, let’s say your employee is supposed to make a $1000 payment for your company. They can simultaneously write another check to $100 to themselves and code it into your accounting system as a part of the payment they were supposed to make. Hopefully, you’ll be able to notice this kind of wrongdoing if you monitor your employees and check your books from time to time.
Fake overtime
If you don’t check your books from time to time, you could end up paying some of your workers for time they didn’t spend working. Employees who have access to your company’s records can always make it look as if they had worked overtime every single day. And depending on the work they claim they did, you can actually end up paying them quite a lot. Even though you may be thinking that this could never happen to you, bear in mind that you’ll have to be very careful when examining your books. This is the case because frauds like this will only increase your payroll by 5-10% which is an amount that can easily be overlooked.
Over-ordering
This is another type of fraud that can be committed by your staff members, particularly those who are in charge of ordering office supplies. They can do this by simply ordering more office supplies than you actually need. They would then keep everything that your business doesn’t need for themselves and sell it or return it to get a refund. In order to avoid this scenario, you should always check everything your employees order and see whether it fits the bills they gave you. Also, make sure you don’t give your employees any reasons to commit this kind of fraud and you’ll be much safer.
Fake friendships
Even if you hire your friends or your friends’ friends, you still have to keep an eye on what they’re doing. There are too many people in the world of business who trusted the people they thought they knew too much only to end up losing so much money that they had to shut down their business forever. Business owners tend to entrust people like this with important information and tasks that involve handling their money without doubting their loyalty. Still, it has been noted that “friends” business owners hire tend to steal money that’s supposed to be used for business operations. So, even if your staff consists solely of the people you know, you should still think about investing in forensic accounting as soon as you notice something weird.
When running a business, you simply have to keep one eye open at all times. Also, bear in mind that you should treat your employees well; that way you won’t give them any reasons to think about stealing from you.