Small businesses are the backbone of America. Entrepreneurs helped build this country and make it great. They employ more Americans and help keep local economies growing. Even many of the large national companies once started as small, individually run companies. Unfortunately, small businesses are often at greater risk for fraud, given they generally have limited resources and fewer accountability procedures. Small businesses are also less able to bounce back after being the victims of fraud. Here are a few areas to watch out for and some tips to help you avoid fraud.
Payroll is one of the most frequently hit areas when it comes to fraud. Whether employees are fudging on their time sheets or exaggerating their overtime, accountability is key. A little here and there may not seem like much, or be noticeable at first but it will add up quickly. Reconciling payroll sheets monthly as well as investigating discrepancies can help catch problems before they get out of control.
Many fraud cases come down to accountability. Often those that are able to get away with fraud, at least for a while, are the sole individuals responsible for paying the bills or managing the books. Double payment of bills—paying the bills once and then writing a check for themselves and attributing it to the vendor—is a common method of fraud. When multiple people are responsible for maintaining the books, writing checks, and paying bills it helps hold everybody accountable. Having the books looked over at least once a year by an outside accountant can also help catch potential problems.
Some of the most frequent perpetrators of fraud are employees that feel they aren’t being fairly compensated. While it may seem like you are saving money in the short-term to under pay or skimp on health benefits, it can ultimately cost you in the long run. Good employees are worth paying a little more for because they are more likely to work hard and be loyal to the company. Of course, there are always exceptions and, again, this is where accountability plays an important role.
It can be hard when you own a small business not to fall into the trap of hiring family friends in need of a job or other individuals who are having a tough time and are in need of a job. It’s natural to want to help where you can but it’s also important to lookout for your business—that provides for you and your employees. Don’t hire someone solely based on who they know or their needs. Find the person that best fits your business’ needs and compensate them properly. When your business is running successfully you can find other ways to help those in need.
This interesting video from CBS talks about an individual who has stolen from nine different companies and cannot stop. Her stealing has become an addiction.