There is a long list of risks associated with running a small business. Among those is the risk of fraud, organizations have reported losing up to 5% of their income to every year. Luckily, there are ways to protect yourself.
Fraud can be really scary to think about–because not everyone is sure how to protect themselves from it. However, there are certain things that you can do to ensure that you are protected from fraud.
For example, you may think since you’re running a small business–you’re less likely to get hacked. This is not always the case–and in the end, you’d rather be safe than sorry. By investing in protection software you’re likely to save yourself a whole lot of time you would have spent worrying.
It’s important that you are aware of any risks that might happen in your business. Here are some risks and how you can avoid them:
This is a type of fraud that mostly occurs between cashiers and customers paying in cash. If a cashier takes a transaction in cash and the customer doesn’t ask for a receipt, it is very easy to take a few dollars off.
You can imagine the issues that this can cause in a small business–especially if they are still using a paper/pencil system. Without a paper trail of some sorts, there is nothing to stop them, so what can you do?
First, rotate your employees–don’t let one employee always handle transactions. You could even require receipts to be made electronically, which will make it easier for you to track.
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Small businesses are specifically open to this type of fraud as well because they may not be able to afford the resources to protect themselves from fraud. One way that this can happen is when your employees are dishonest.
Since small businesses may not have the technology to track when an employee clocks in or out, they may lie about how much they worked. The best way to combat this is to have some sort of system in place to track hours rather than relying on your employee’s word.
Another way is for employees who work on commission to lie about sales or transactions that may not have taken place. This is why having some sort of system of supervisors or managers in place, you can cut down on this.
Workers Compensation Fraud
Workers compensation is something that many companies offer. It is used when an employee gets hurt on the job to help pay for time off and potential medical expenses–in essence, compensating them for their injury.
However, for every valid use, there will be someone trying to cheat the system. This can be done by employees getting hurt off hours then claiming it happened on the job–or even by exaggerating or faking an on-job injury.
This isn’t to be combated by removing workman’s compensation. Actually, you can combat it by making your business a safe place to work to reduce injury or the possibility of injury as much as possible. This includes making sure your employees have all the safety equipment that they need and the proper training to make sure they’re doing thing the right way.
This is another example of fraud that small businesses are especially at a risk of. This fraudulent invoicing usually occurs by creating a very professional invoice. However, the products or services on the invoice never occurred.
The fraud usually goes through by a lack of double checking. A small business is busy, so they simply pay the invoice and move onto the next one.
The solution? Don’t pay anything without careful consideration. If you don’t suspect that the charge is real, make sure to double check it. You can also consider automating your invoicing process, which would eliminate human error.
There is no other way to avoid an invoicing scam other than being as careful as possible.
Tampering with Checks
Check tampering can occur in a couple ways to suck money out of businesses. The most common method is for an employee to write a check to a fake payee and then cash in on it by working with those people or businesses.
Another way would be for an employee to tamper with pre-existing checks that are legitimate. This is done by changing the payee name to their own–or even a false name or company. At that point they can collect the funds for themselves.
How do you protect yourself from this? Add extra people to check the checks and company’s finances. In addition, make sure that the business owner signs each check personally, so they are able to see any tampering evidence.
If you notice something that’s off, address it immediately. You want to get to the bottom of it as soon as possible–before it becomes a huge problems that’s hard to fix.
Fraud is common in the workplace, but it isn’t impossible to avoid. By adding certain techniques, or using automation, you will notice that your risk for fraud as a small business goes down by quite a bit.
About The Author
Susan Ranford is an expert on career coaching, business advice, and workplace rights. She has written for New York Jobs, IAmWire, and ZipJob. In her blogging and writing, she seeks to shed light on issues related to employment, business, and finance to help others understand different industries and find the right job fit for them.