Protecting your business against Fraud

Fraud is one of the most common ways in which a business can lose money. More often than one thinks, every business is susceptible to fraud, at any time. This unfortunate situation is also largely attributed to the fact that there are so many kinds of fraud available to those looking to cheat the system.

Fraud Against Businesses

Businesses are more likely to be the victims of fraud than individuals because they deal with so many employees, suppliers, and customers every day. Anyone these groups of people can be attempting to defraud the company.

  1. Employee and Insider Fraud

The most common types of insider fraud are theft of assets and accounting fraud; if these are done by employees, this type of fraud is often termed embezzlement. Other ways employees and other insiders defraud a company is by skimming cash, writing fake checks to themselves, or taking goods or supplies from the company.

  1. Customer Fraud

Customers or can defraud a business in several ways, including writing bad checks, using bad credit cards, shoplifting, returning items not purchased to get a refund (called return fraud), or filing a false claim for an injury or accident on your property.

  1. Contractor or Supplier Fraud

Independent contractors or subcontractors who do work for your company can scam you on work, over-charge, or bill for work never done.

How to protect your business against fraud

While you can’t exactly prevent every instance of fraud from happening to your business, there are ways in which you can protect your business from continuous fraud through these useful tips:

  1. Employee tips

–    Do background checks on all new employees, particularly those who have financial responsibilities.

–    Separate financial duties so no one person does everything.

  1. Customer tips

–    To avoid cash loss, train employees on how to spot counterfeit money, bad checks, and stolen credit cards. Institute specific policies in dealing with these situations.

–    Set up inventory control policies to keep track of supplies and inventory, so it doesn’t walk out the door. You may not be able to count every pencil, but you should always know what’s in the supply cabinet or inventory.

  1. Contractor or Supplier tips

–    Review accounts payable, invoices, and purchase orders periodically to make sure they are from real contractors and/or suppliers, and that you are getting the items you order.

Other useful tips in protecting your business against fraud

–    Protect your back accounts.

–    Prevent identity theft by monitoring your business accounts.

–    Setting up systems to monitor activity in all critical areas, from employees to customers to contractors, and so you know what’s going on.

–    While there are many precautions you can take, no measure is foolproof. If a fraudulent attack does occur, having insurance is crucial.

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