Methods to Avoid Fraud in Small Business

Methods to Avoid Fraud in Small Business

Methods to Avoid Fraud in Small Business

We are all aware of the dangers of being a victim of fraud. Even moreso, a small business may suffer insurmountable damage from someone committing fraud within their network. Here are some tips to protect yourself from possible fraudulent behavior. Most require a vigilant eye and noticing subtle changes that may occur right under your nose.


Qualified Accountants

It is advised that every year a new team of accountants is hired to review your ledgers and numbers. They will be better able to spot inconsistencies as they are coming into the job with new eyes and no previous knowledge of the company’s spending. Most likely, a new accountant will also adhere more firmly to your rules and expectations as opposed to someone who may have gotten comfortable over time and thus less observant.


Accounts Receivable & Accounts Payable

The same employee(s) should not be in charge of overseeing both. Chances of committing fraud is much greater as the bookkeeping can be doctored and the changes in invoicing and payments could be undetected and you would see none of those profits. Take very close looks at your bank and credit statements. All canceled checks should be noticed and questioned why it happened and whether the money was returned to the correct accounts.


Vendor and Customer Relationships

The same type of issue may occur if an employee and a vendor (or even a customer) get too close for comfort. Some illicit behavior such as bribery or theft may occur that may result in lawsuits from various entities including regulatory agencies.


Changes in Lifestyle

If an employee or partner has a dramatic change in lifestyle, such as obtaining an expensive car or taking lavish vacations, refrain from accusations of embezzlement. This may be cause for a lawsuit for various reasons so you must make sure you do your due diligence in researching this. Sometimes a person could have gotten a lucky lottery ticket, you never know. Do not accuse.


Always be Watchful

Along with being vigilant over the behaviors of your employees, vendors, and customers, make it known that you are doing so. Those who are thinking about embezzling from you will think twice if they know you are constantly monitoring all the moving parts of your business.



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