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4 Easy Steps to Prevent Business Fraud

9 Mar

A recent study estimates that a typical organization loses 5% of its annual revenue due to occupational fraud and abuse.  And nearly all companies are susceptible to risk according to the Association of Certified Fraud Examiners.   Recent high profile cases have been beneficial as more executives are becoming aware of white collar crimes.   Yet many Small Businesses don’t take the necessary precautions to prevent being victimized.

As Ben Franklin once said, “An ounce of prevention is worth a pound of cure”.

 

Fraud usually begins on a small scale and then escalates when undetected.  An undercover Pennsylvania State Trooper has recently seen an increase of embezzlement cases in very rural areas of western Pennsylvania.  One of which was a small Catholic Church in New Castle, PA.  Many of the victimized companies, reports this Trooper, were shocked that it happened to them.

Here are 4 easy steps for organizations that may identify fraudulent activity or perhaps even prevent it.

  1. Owners & Managers must learn Business Acumen – Many Small Businesses heavily rely on their Accountants to detect such activity within their organization.  But, at the end of the day, it’s the Small Business that is ultimately accountable.  So, a little education in this area will go a long way.
  2. Ask the Accountant for more – Many Accountants provide the typical Business Services…quarterlies, payroll and year-end taxes.  But that doesn’t mean they can’t do more.  Ask the accountant to periodically review the financials for suspicious activity.
  3. Get a Business Health Check-up – A comprehensive analysis of your business’s financial and operational position can be an early detector of financial misbehavior.
  4. Be Alert – Owners should be awake at the wheel and be mindful of “red flags”.  Pay close attention to detail and have good people skills.  Sometimes it is those who are trusted the most that become the biggest disappointment.

In a globally competitive world and while businesses slowly recover from the recession, it’s more critical now than ever that businesses don’t fall victim to fraud, embezzlement or any type of financial mismanagement.  Statistics show that white-collar crimes are on the rise.  And now many Universities and Schools have added one or two forensic courses to their Accountancy programs while Conferences on Forensic Accounting and Fraud Detection are gaining popularity.   These are all signs of an alarming trend adding more to a business owner’s plate.

So, don’t be part of the headline in tomorrow’s paper.  Take action immediately and make the necessary adjustments to prevent an unnecessary financial hardship.  It starts with leadership and can end with compliance, business acumen and a stronger, healthier organization.

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