Fraud costs Australian businesses billions of dollars every year – the exact amount is difficult to determine but was estimated to be around $6 billion in 2011. While fraud is a fairly generic legal term, we will focus on fraud against small businesses in this article. By their very nature, small businesses tend to have few staff, which can lead to a single person undertaking several roles that may provide an opportunity to commit an act of fraud. For example, the person who receives cash and cheques shouldn’t be the same person responsible for the recording of those payments, but for many small businesses, that is exactly what happens.
So, with so much money being stolen, fraud prevention should be a major focus for all small businesses, but many have few or no measures in place. Why? It may be a lack of awareness, or it may be a desire not to give the appearance of distrusting staff. If you are in the first category, here are 5 keys to help fight fraud in your business. If you are in the second category, read on…
Reducing the risk of fraud for your business doesn’t need to involve confrontations or accusations with staff. Unless you specifically suspect fraud in a particular area or by a particular staff member, extreme measures like CCTV surveillance aren’t necessary. The first step in managing the threat of fraud is to understand where the possibility for fraud occurs in your business. As in the aforementioned example, do you have one person managing all aspects of accounts receivable and payable? Is there a process for purchasing assets both large and small? Is there one person responsible for sourcing quotes and choosing successful bids? Do you ever do independent audits? Or even internal audits?
Undertaking an external audit doesn’t need to immediately imply distrust, there can be a number of reasons for undertaking an audit, including valuing the business for re-financing or sale, or for accurate tax reporting. If the audit turns up irregularities, then it simply becomes a case of following the paper (or digital) trail, or discovering where the paper trail is missing if someone is hiding or omitting records.
If it is obvious that money or assets are missing, then there is a legitimate reason for asking questions, and any staff member who is offended by an investigation doesn’t really have the best interests of your business at heart.
By Jennifer Lowe