3 Ways to Protect Your Business Against Fraud

A lot of businesses lose revenue due to fraud. The Association of Certified Fraud Examiners (ACFE) recently published a report that estimated businesses lose up to 5% of their revenues to fraud. ACFE claims that companies with less than 100 employees represent a third of all fraud cases (the largest share in the industry among businesses of any size). The same report concludes that small business suffer higher median losses than any size company at $150,000 per occurrence in the U.S.

In many cases small businesses lack proper internal controls, proper segregation of duties and adequate external oversight; processes which can greatly reduce their exposure to fraud from within their organization.

Small businesses typically ignore putting these processes in place because their management believes that they are either unnecessary or too expensive. Enacting these simple and yet practical measures may, however, help stave off unintended costs. Here are some important measures to implement:

Let’s consider 3 ideas on protecting your business against internal fraud:

  1. Installing good segregation of duties within your organization: This will probably cost your business very little if anything. A good example of a good segregation of duties is one where one employee invoices customers and a different employee posts the customers payments once they are received.
  2. Implementing internal controls: Internal controls are operational processes/actions relating to work authority and accountability that will enable a business to achieve specific ways to implement a policy that splits the responsibiltyof reviewing the monthly statements from that of writing checks.
  3. Consider external oversight: External oversight comes in many different forms and may deter fraud in a myraid of ways. For example, it is prudent for any business owner or CFO to ask their CPA to conduct regular reviews of accounting records to ensure that they are accurate to complete.This will allow employees to see that management is keeping an eye on the numbers. It also is good for any business to hold anti-fraud training for employees to foster an ethical culture. One that helps them learn how to look for fraud and what to do if they are concerned that fraud is occuring.

While there is no way to completely deter fraud from occuring within your business, you should always be aware of fraud, monitor your exposure to fraud and take the important steps to minimize that exposure.

garvey & garvey llc provides traditional accounting services in a non-traditional way. We understand that one size never fits all, and we approach each situation with a fresh viewpoint and a commitment to understanding your business.