Fraud is a major problem in many industries. However, it often hurts small and medium-sized businesses the most. Fraud can not only hurt you financially, but it can also damage the relationship and trust that you’ve built with your clients, suppliers and other business associates.
Small businesses usually have fewer checks and balances in place that prevent fraud in the first place. Many small businesses are also family-owned, which means that most of their employees are well-known to them. The trust that you may have in your partners and employees and the relative lack of oversight in your business compared to what goes on in large companies make it easier for fraud to occur.
So how do you stop fraud before you suffer tragic losses?
1. Look for signs of trouble with an employee.
Most people don’t start out intending to steal from their employer or commit fraud. However, about 80% of those who commit fraud were, in retrospect, giving off signals that should have alarmed their employers. An employee who seems to play fast and loose with the rules could be trouble. So could an employee who is experiencing financial difficulties or living well beyond their visible means.
2. Add anti-fraud, anti-theft measures into the routine.
If you’ve always trusted your employees and partners, you may never have considered implementing internal controls designed to prevent fraud. That’s important to do, however. You want to be able to show your clients and investors that you’re doing everything you can to combat a potential issue like identity theft or account skimming.
A well-defined code of conduct and internal audits can help keep fraud at bay. So can creating a company culture that stresses the rules and personal integrity. Even making it clear that you are reviewing the books regularly can help deter a problem.
If you believe your company has already fallen victim to fraud or embezzlement, find out how a business litigation attorney may be able to assist.