Those starting their own businesses like to think they’re in control. But the reality is that most are not in control of their own security.
The Association of Certified Fraud Examiners found that corruption and billing schemes were the leading types of fraud in the U.S. and the rest of the world. In a study, they also found that small businesses are especially vulnerable to fraud.
It can be avoided, however, if you keep your eyes open. Start with audits - they’re helpful and many businesses depend solely upon them to detect fraud. But there are other, clearer ways to detect it.
Look for changes in inventory without changes in sales, says Allison Muzal, owner of Bookkeeping Express in Westchester; if inventory is low and sales don’t increase, there’s a problem. But even this is just a logical solvent for fraud. Some aren’t so obvious, like an employee who seems incredibly dedicated, works late, takes work home, and refuses to take vacations. Sounds like an ideal worker, doesn’t it? Not always.
Muzal says the main avoidance of fraud is not to segregate duties among staff. “You don’t want one person to handle duties,” she says. “At least have two people completing a task. Make sure there are two people signing checks instead of one. Check tampering is the number one cause of fraud.”
She adds that small business owners are often too focused on the business itself to pay attention to the financials - and that trust in employees with longstanding ties to the business owners (like relatives and friends) can be hazardous.
It might be against your principles to give in to cynicism, but when the future of your business is at stake, it’s worth it.