Is your business’s safe from fraudulent losses? Here are 4 ways fraud is committed. Every small business’s owners should know about them and take steps that their business doesn’t suffer losses.
1. Payroll Fraud: In one case, employees filed time sheets – with lots of overtime – for two different jobs that were 50 miles apart. Amazing that these employees could put in overtime at these two different sites and, maybe, more amazing that it wasn’t discovered until the payroll account was given to a new company. The loss was $80,000 but only 4% of the payroll so it didn’t raise an immediate flag. Protect yourself – reconcile all balance sheet accounts and payroll records on a monthly basis – or, hire someone to do it for you.
2. Double Check Fraud: A bookkeeper writes a check for widgets for $500 and then writes one to his or herself for $100. Same company, same day so on the financial statements – which were reviewed frequently – the amounts paid for widgets looked a bit high, but not enough to be a concern. The double check fraud was found when the bookkeeper got sick and a replacement noticed that the bank accounts weren’t reconciled. Once the reconciliation started, the embezzlement became clear. It had gone on for years and amounted to over a half million dollars. Protect yourself two ways – make sure that the person that writes check isn’t the person to reconcile the accounts. You need two people. Hire someone to review the books and reconciliations at least once a year – and have them come at random times so the books can’t be prepared in advance.
3. Over-Ordering Fraud. This one is simple. An order for office supplies has a little extra in it. The extra is returned for a gift card. The gift card is used for a small purchase if the store will refund the rest in cash. Or, extra items can be sold fraudulently. Pay attention to all purchases. Have someone other than the person who ordered them, inventory the items when they arrive.
4. Business Identity Theft. Just as an identity thief can steal your good name, a business identity thief steals your businesses good name and good credit. Because business’s have more money in the bank and more credit, that thief can steal enough to put you out of business. What can a business identity thief do? He or she can order goods in your name, get credit in your name and more. They can file false W-2s to get a tax refund – and that will send the IRS to your door asking why you didn’t pay those withholding taxes. Protect yourself by protecting sensitive information, making business filings on time and checking your credit history carefully and regularly. Look for accounts that could be fraudulent.
Today’s business owners must be especially vigilant. Employees need to be monitored and they need to be trained to handle sensitive information carefully. Take steps to protect yourself. Use outside services to review your accounts. Use an on-site shredding company that can help protect all your sensitive documents with on-site shredding, secure storage and locked bins for documents awaiting shredding. Don’t be the one out of two who are likely to suffer from fraudulent losses.