Small Business Fraud Prevention Tips

U.S. organizations lose an estimated 5 percent of annual revenues to fraud. That's $638 billion based on the estimated Gross Domestic Product for 2006. And the news is even worse for small businesses.

The Association of Certified Fraud Examiners (ACFE), in its 2006 Report to the Nation on Occupational Fraud and Abuse, found small companies suffer disproportionate fraud losses.

The median loss by organizations with fewer than 100 employees was $190,000 per incident. That's higher than the median fraud-induced loss in even the largest organizations.

Small businesses face another challenge when it comes to dealing with fraud. Since smaller companies must keep a close eye on the bottom line, the companies are unlikely to have an internal audit department. ACFE's report found that less than 20 percent of small organizations had internal audit departments, and less than 10 percent of small organizations had anonymous fraud reporting systems.

There are some simple steps a small business can take to help reduce its potential losses due to fraud.

1. Be proactive. Establish some method of internal control. Adopt a code of ethics for management and employees. Set a tone at the top that demonstrates that your company will not tolerate any unethical behavior. Create a fraud policy that sets forth what conduct is expected from employees, what actions are prohibited, how fraud can be reported and the punishment for noncompliance.

2. Establish hiring procedures. Every company, regardless of size, can benefit from formal employment guidelines. When hiring staff, conduct thorough background checks. Verify educational and employment history, as well as references. After someone joins your staff, incorporate evaluations of the employee's compliance with company ethics and antifraud programs into regular performance reviews.

3. Train your employees in fraud prevention. Once your carefully screened employees are on the job, make sure they are trained in fraud prevention. Your staff serves as your company's eyes and ears. ACFE research has repeatedly found that employee information is a prime way that companies discover and halt fraud. Do your workers know warning signs of credit card fraud, such as a customer pulling a card from a pocket instead of a wallet? What about general retail fraud red flags, such as a buyer making random item purchases or asking about the floor limit? By ensuring that your staff knows at least some basic fraud prevention techniques, you'll establish a first line of anti-fraud defense.

4. Conduct regular (and irregular) checks. High-risk areas, such as your financial or inventory departments, are obvious targets for routine checks. But you should also conduct surprise reviews of these and other parts of your business. By searching out potential fraud, you can find any incidents early or, even better, prevent fraud completely.

Featured

New Products

  • Camden CV-7600 High Security Card Readers

    Camden CV-7600 High Security Card Readers

    Camden Door Controls has relaunched its CV-7600 card readers in response to growing market demand for a more secure alternative to standard proximity credentials that can be easily cloned. CV-7600 readers support MIFARE DESFire EV1 & EV2 encryption technology credentials, making them virtually clone-proof and highly secure.

  • PE80 Series

    PE80 Series by SARGENT / ED4000/PED5000 Series by Corbin Russwin

    ASSA ABLOY, a global leader in access solutions, has announced the launch of two next generation exit devices from long-standing leaders in the premium exit device market: the PE80 Series by SARGENT and the PED4000/PED5000 Series by Corbin Russwin. These new exit devices boast industry-first features that are specifically designed to provide enhanced safety, security and convenience, setting new standards for exit solutions. The SARGENT PE80 and Corbin Russwin PED4000/PED5000 Series exit devices are engineered to meet the ever-evolving needs of modern buildings. Featuring the high strength, security and durability that ASSA ABLOY is known for, the new exit devices deliver several innovative, industry-first features in addition to elegant design finishes for every opening.

  • Mobile Safe Shield

    Mobile Safe Shield

    SafeWood Designs, Inc., a manufacturer of patented bullet resistant products, is excited to announce the launch of the Mobile Safe Shield. The Mobile Safe Shield is a moveable bullet resistant shield that provides protection in the event of an assailant and supplies cover in the event of an active shooter. With a heavy-duty steel frame, quality castor wheels, and bullet resistant core, the Mobile Safe Shield is a perfect addition to any guard station, security desks, courthouses, police stations, schools, office spaces and more. The Mobile Safe Shield is incredibly customizable. Bullet resistant materials are available in UL 752 Levels 1 through 8 and include glass, white board, tack board, veneer, and plastic laminate. Flexibility in bullet resistant materials allows for the Mobile Safe Shield to blend more with current interior décor for a seamless design aesthetic. Optional custom paint colors are also available for the steel frame.