If you own a small business, it’s likely that you may have experienced some form of business fraud at some point – or not been aware that it happened. It’s especially troubling considering that business fraud has been occurring more frequently since the economic downturn began in 2008.
And while the economy is slowly recovering now, business fraud is still on the rise. According to the Association of Certified Fraud Examiners (ACFE), 5% of business revenue is lost to fraud and embezzlement every year – about $730 billion!
Business fraud can cost small businesses an even greater loss because they’re more frequently targeted due to a lack of basic antifraud controls being instituted. The average loss for small businesses from fraud? $150,000.
So what should your business be doing to avoid these kinds of losses? Here are some common-sense steps to keep fraud from affecting your bottom line:
Create and enforce a fraud policy. The first and most effective step is to create a company fraud policy. Be sure to enforce that policy by making it part of employee orientation or a separate training program. This will let employees know that fraud is looked for and not tolerated in the workplace. Employees are more likely to think twice about committing fraud if they know the company is watching closely.
Conduct employee background checks. Before hiring an employee, conduct a full criminal background check. And if you don’t have time or resources to do so, at least contact potential employees’ references to verify past employment. You should also conduct a basic Google search to verify resume consistency. Both steps can alert you to “red flag” employees – and help you avoid problems in the future.
Consider surprise audits. While audits should be conducted by every business, many do not. And while audits are important, businesses that conduct them without warning have the most success in discovering fraud. A schedule will give an employee much-needed time to hide the fraud, while a surprise audit will likely catch him or her off guard.
Conduct credit checks. Consider conducting a credit check on potential employees, as this will reveal individuals with financial problems. Unfortunately, individuals experiencing financial problems are more likely to consider and commit fraudulent acts. Knowing these problems up front could save your business time and money in the long run.
How much these steps will directly prevent business fraud is unknown, but including them into your business plan is a solid “first step” in protecting your business.
For additional information, you can visit the FBI website or talk directly with the First National Bank-Fox Valley team.