Small businesses often don’t take into account the risk business fraud can have on them. A business which is in its infancy may lack the resources available to manage fraud. This makes it essential to have fraud prevention in place. Small business owners must be clear about the need for fraud protection to ensure resource allocation in an optimal way. Signs of business fraud include the following:
Small Business Fraud Sign #1: Workmen’s Compensation Fraud
Small businesses offer workmen’s compensation insurance for employee benefits. This system is cheated for personal profit. Employees may make false claims for fake or exaggerated workplace injuries. Cheating to evade the system, the employee will opt for workmen’s compensation. Employees stay away from the work setting this way and ensure that money is paid by the company upfront. Employees need to work in a safe environment and use the proper safety tools to complete the task.
Small Business Fraud Sign #2: Check Tampering
Another type of fraud that is rampant among small businesses is check tampering. There are many different ways that check tampering fraud can take place. The most blatant type of tampering occurs when employees write checks to fake payees and appropriate the funds. Another way to check tampering is when the employee tampers with legitimate checks by making the change in the payee’s name. To protect your small business from check tampering fraud, more than one person should be in place to check the finances of the company and have business owners sign checks after double checking.
Small Business Fraud Sign #3: Revenue Skimming
Skimming revenue is the kind of fraud that takes place when cash is provided by customers for a product and service and the cashier does not receive a receipt. Employees collect cash from the customer and pocket it. With the lack of a paper trail, no record of the sale exists. To prevent revenue skimming, businesses need to segregate and change duties among employees that partake in cash transactions
Small Business Fraud Sign #4: Fraudulent Invoicing
Economic fraud investigation professionals warn small businesses about invoicing schemes too. In a fake invoicing scheme, a person or business will send a professional looking invoice for products or services to a company. Businesses may end up paying the invoice without checking that purchases are made. The conman on the other end of the ploy makes away with the cash. So make sure you match up products and services to invoices to avoid being part of this kind of small fraud.
Small Business Fraud Sign #5: Payroll Fraud
Pay rate alteration, payroll manipulation– these are all forms of payroll fraud. Small businesses have a great chance of falling prey to payroll fraud. Most lack anti-fraud controls in place. It is important for small business owners to be aware of this type of fraud. Payroll fraud can occur in different ways. Employees may state they have worked more hours than actually did and in return, gets money for work they did not do. Alongside this, payroll fraud takes place when salaried employees have access to change in salaries and payroll records. Another kind of payroll fraud takes place when employees receive fake orders or sales. Supervisors or managers need to review time sheets on a constant basis to avert this kind of business fraud.
Small Business Fraud Sign#6: Vendor Billing Fraud
This type of fraud happens when employees create a shell firm and pays them through business checks from the workplace. Vendor billing fraud is akin to check tampering or fraudulent invoicing fraud. Certain warning signs to consider is when checks are written out to cash or business listing the same address as their own home. Additional vendor fraud takes place a person hired a friend or family member owning a business for certain products or services. This business fraud can be avoided by vetting vendors before a check is signed.
Insider fraud, data breaches, attack on consumer networks, theft of business identity and opening of credit accounts are only some of the many ways a business fraud can be perpetrated. As a small business owner, you need to be alert and aware, so that your growth and profits are not threatened by some fraudster.