Fraud Prevention for Small Businesses: Tips to Stay Protected
But when it comes to fraud, crimes where you are deceived or tricked out of money, things can get a bit more complicated.
Fraud prevention for small businesses starts with knowing what exactly prospective fraudsters are looking for, and how they tend to commit their fraudulent acts. Here are some quick tips to help protect you and your small business from fraud.
There are two types of fraud
Fraud can affect your small business in two ways, on both sides of the counter. The first type, internal fraud involves employees who deliberately cook the books or change inventory sheets to hide criminal activity, like taking product home with them or skimming cash. External fraud, the second type, can take several forms, from a contractor not delivering or overbilling on agreed-upon terms to payments made with stolen credit cards or counterfeit cash to malicious hacking for valuable company information.
Prevention starts with education
To prevent fraud from affecting your small business, educate yourself and your employees on the types of fraud to look out for. For example, if you run a store, you might teach your employees how to sniff out counterfeit cash or faulty cheques. If you run an office, teach your employees how to choose secure passwords for their company computers.
Clearly outline fraud policies
Although fraud may seem fairly straightforward, grey areas may exist in your office which need to be defined to your employees. For example, ordering extra office supplies with the intent of taking some home for personal use, may or may not be fraud depending on your own definition. Also be sure to clearly outline the punishment for committing fraudulent activity to avoid misunderstandings between you and your employees further down the road.
Keep up-to-date records
The easiest way to monitor for fraud affecting your small business is to practice good record keeping. Not only does keeping good records flag potential fraudulent activity, but also serves as evidence when you need proof. When you are keeping tabs on the pulse of your small business, you are in control.
Get the right people
Remember that fraud is entirely about deceiving. When hiring a new employee, always do your homework and conduct extensive reference checks. Not only does this help weed out bad apples, but saves you the headaches they may have caused previous employers. Better safe than sorry.
Offer a line
Since nobody wants to be labelled as the office tattletale, employees are not likely to report fraud if they cannot do so anonymously. While there are several ways of doing this, an easy way to do this would be to set up an online shared document to which your employees can submit to but not see.
Make sure you’re covered
Despite precautions and preventative measures, incidents of fraud may still occur. Having proper insurance for your small business helps you recover some losses. Speak to your insurer to make sure you and your business are protected with the right insurance coverage.