With the rates of financial fraud increasing year over year it has become important to protect yourself and your business from financial fraud. Below you will find common forms of fraud followed by some steps to reduce your exposure to fraudsters.
1. Payroll Fraud
Payroll fraud is one of the most common types of fraud. This type of fraud can take many different forms, but usually involves someone manipulating the payroll system to either inflate their own wages or creating fictitious employees to pocket wages. Payroll fraud could also take the form of the manipulation of wage payrate in accounting software or adding additional hours that were not worked.
To help protect your business there are a few things you can do to prevent or detect payroll fraud:
– Add a password to restrict access to accounting software to prevent wage rates from being modified.
– If possible separate duties such as who is signing off timesheets, paying cheques and recording wages in the accounting software. This reduces the opportunity for individuals to cover up fraud.
– Occasionally review payrates and the existence of employees to check for changes or fictitious employees.
If you suspect that payroll has been manipulated it is important to investigate to prevent further losses.
2. Asset misappropriation
This can take several forms such as the misuse of company funds, resources, or theft of assets for personal gain. This can take many forms such as embezzlement or simply taking company property for personal use. Not only does it lead to financial losses, but it can also damage employee morale and erode public trust in the company.
To protect your business from asset misappropriation there are a few measures you can implement.
– When not in use, any expensive or small assets can be locked away to reduce the opportunity for theft.
– Restrict staff’s ability to make purchases with company funds if possible. If employees need to make regular purchases make a requirement or set a threshold of purchases that require approval before being made.
– When accepting inventory monitor or have a trusted manager or employee that is not collecting the shipment to sign off items that are received. This reduces the opportunity for individuals to steal.
3. Identity Theft
Identity theft is a serious problem that affects millions of people each year. It can happen to anyone, at any time. Identity theft occurs when someone uses your personal information, such as your name, Social Security number, or credit card number, without your permission. With this information the fraudster can commit crimes or steal from you in your name.
To reduce the opportunity for your information to be stolen consider changing your passwords every few months and setting up two factor authentication. Two factor authentication requires that the fraudster have access to both your login information and your chosen device often your phone.
If you suspect identity fraud has been committed, contact the credit reporting agencies and place a fraud alert on your credit report. This will prevent the fraudster from opening bank accounts in your name.
What course of action should businesses take if they are the victim of business financial fraud?
If you’ve been the victim of business fraud, you may feel like there’s nowhere to turn. But there are a few things you can do to try to get your money back and protect yourself from further fraud.
1. Contact the company: If you’ve been defrauded by a company, your first step should be to contact them directly. Many times, businesses are unaware that their employees are committing fraud and will be willing to help you get your money back.
2. File a police report: If you’ve been the victim of business fraud, you should file a police report. This will help to document the crime and may lead to legal action against the person who defrauded you.
3. Contact your local Better Business Bureau: The Better Business Bureau can help you file a complaint against the company and may be able to get your money back for you.
Other anti-fraud measures
According to the Association of Certified Fraud Examiners, small businesses make up approximately 20% of all fraud cases. While fraud can happen to any business, there are steps you can take to prevent it.
Below are some tips to help prevent business fraud:
1. Keep good records– This includes maintaining accurate financial records and keeping track of inventory. Good records will help you catch any irregularities.
2. Conduct background checks on employees– This is especially important if you are hiring someone to handle finances.
3. Implement internal controls– This could include things like requiring two people to sign off on financial transactions.
4. Beware of red flags– Things like sudden changes in spending patterns or unauthorized wire transfers can be signs of fraud.
5. Stay up to date on latest scams- Scammers are always coming up with new ways to defraud businesses. Stay informed so you can recognize.