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The Business of Preventing Fraud

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fraud-calculator-indicates-rip-off-and-calculate-100303071While both large and small businesses can fall victim to fraud, its small businesses that are at the highest risk, with a frequency around 31 percent, according to Association of Certified Financial Examiner’s (ACFE) 2012 Report to the Nations.

The report states that the most common types of fraud amongst small businesses are billing fraud, corruption, check tampering, skimming and expense reimbursement fraud.

Sadly enough, close to half of the fraudulent individuals had been with the company between one and five years.

Breakdown of fraud in the workplace: The ACFE found that of those that are guilty of fraud, 42 percent are employees, 38 percent are managers and 18 percent are business owners or executives.

Fraud Can Occur Just About Anywhere

Surprisingly, even physicians can be affected by fraudulent acts.

The article “Physicians and Stolen Tax Returns: Avoiding medical malpractice fraud” states that physicians in Texas, in addition to other states, are victims of bogus filers that are trying to scheme millions of dollars from the federal government.

While typically the physicians aren’t responsible for these acts, being a victim of fraud takes a tremendous toll on one’s life by adding an immense amount of stress that could have been avoided.

How to Stay a Step Ahead of Fraud

For individuals, such as the physicians mentioned above, they can protect themselves by contacting the Identity Protection Specialization Unit and filing a complaint with the Federal Trade Commission, the US Department of Justice and the Social Security Administration.

Businesses can protect themselves by:

  • Use highly-secured computers – For all banking and financial duties, you should have a computer strictly for those needs and those needs only. No surfing the web, no sending emails and no playing games. Install antivirus software on the computer to prevent your information from being hacked.
  • Keep tabs on your money and personal information – Never wire money unless you know for sure that the recipient can be trusted. Also, do not give out your personal business information to those that you do not know. Check all your bank statements on a regular basis to make sure there is nothing sketchy going on with your accounts.
  • Always perform background checks on employees – Ensure that their past is clear by performing background checks on all potential employees.
  • Insist employees take time off – A main characteristic of a fraudulent employee is someone who insists on never taking any time off of work. The reason being is that they do not want anyone else doing their job for them and perhaps catching them in their fraudulent activities. Have employees work in teams and check each other’s work regularly.
  • Encourage an honest environment – By encouraging honesty throughout your company, keeping tabs on employees and even setting up an anonymous “fraud tip” phone line, you lesson your business’s chances of falling victim to fraud.

While fraud cannot always be prevented, it does tend to happen more often in businesses that are not actively trying to avoid it.

Always have your guard up, follow your accounts closely and if you suspect something suspicious, confront that employee immediately.

Photo credit: Image courtesy of Stuart Miles at FreeDigitalPhotos.net

About the Author: Sarah Brooks is a freelance writer living in Charlotte, NC. She writes on a variety of topics including small business, social media and personal finance.

Are You Secure in the Employees You Hire?

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One of the biggest challenges that small business owners have is finding the right employees to help take their company to new heights.

In order to find the right pieces to the employee puzzle, it is important that those running businesses take an ample amount of time to research all prospective employees, especially in a day and age of a struggling economy, not to mention numerous cases of identity theft.

According to a number of corporate security experts, some 25 to 40 percent of all workers swipe stuff from business owners, with the U.S. Department of Commerce (DOC) estimating that employee theft involving cash, property, and merchandise may cost American companies upwards of $50 billion on an annual basis.

While some business owners are on top of the matter, others find themselves so busy that they can easily miss theft going on right under their noses.

So, how can you as a small business owner better prevent yourself and your company from being crime victims?

Among the things to look at:

* Screening applicants – First and foremost, make sure you do a thorough screening for each and every employee you consider hiring (see more below). While their qualifications for the job may be outstanding, they could have a skeleton or two in their closet that could end up costing you more than just time missed on the job. Even though many job application forms ask applicants if they have been in trouble with the law, don’t be naive to think that everyone fills them out truthfully. If your suspicions are raised about a candidate, follow through on them to make sure this individual will not cause you trouble should you hire them;

* Social media chatter – One of the ways to screen employees is to follow their chatter on social media. While most are probably smart enough not to brag of any past thefts involving employers, some folks just can’t help opening their mouths. If you see any such behavior on social media that indicates this applicant may be a troublemaker should you hire them, move on from them to the next person;

* Change in routine – In the event you hire someone and notice a change in their habits, don’t automatically dismiss it as no big deal. Most people have a schedule they follow on a daily basis. If someone has been coming in normal hours for several months, then does a 180 and comes in unusually early or stays later than normal, there is nothing wrong with questioning them on it. While the change may be to personal scheduling needs, it could also be to access items at work such as financial records, computer passwords etc. that could be a precursor to theft;

* Financial freedom –  Depending on the size of your small business, you may have one or more people handling finances, i.e. who cuts the checks, who has access to the company credit card to make office purchases or travel to meet clients. Make sure the individual or individuals in charge of such tasks are trustworthy enough to have in this position. It never hurts for you or someone outside the finance department to check the books from time to time, looking for any inaccuracies or large withdrawals during the year;

* Secure your business – Even though you may be watching every dollar you spend, having a security system in place at work is not only to keep the bad guys out, but also to make sure you don’t have any thieves right there in the office. Having an employee take a pen or two from the office supply home with them is a far cry from taking money out of the payroll box or making out checks to themselves for supposed “work-related” expenses. Whether you go with obvious security like cameras on the ceiling or closed-circuit cameras, locked boxes for money and other financial items, or having a log that all employees must sign in and out with to remove any items from the office, have a secure plan in place;

* Let them be warned – Lastly, make sure EVERYONE under your employ knows there are consequences if they are caught stealing from the business. With the economy still struggling to gain sound footing, it is not uncommon to pick up the newspaper or read online of another employee arrested and charged with employer theft. If you don’t point out the severe consequences that can happen with such decisions, you set yourself and your business up for trouble.

Employee theft happens more often than you may realize, so don’t be the next victim.

Photo credit: martinpi.com

About the Author: With 23 years of experience as a writer, Dave Thomas covers a wide
array of financial topics, including finding the right home security system.

Do Employees Get Credit for Being Honest?

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While it is not a common day occurrence, you also are not entirely surprised when you pick up the newspaper, turn on the television, or go online and hear about an employee who was stealing from their employer. Specifically, using the office credit card for their betterment.

As noted, while the cases may be in the minority, they can still be devastating to a small business, especially one that is having trouble making a go of it or is just getting its feet wet in the business world.

Some examples include:

* The office manager who is in charge of ordering supplies suddenly gets the urge to go on a small shopping spree of her or his own. While ordering stuff for the company, they conveniently order some items for themselves. Before you know it, they have spent hundreds or even thousands of company dollars, leaving a blotch of red ink in the company’s finances;

* The employee who travels often for their company gets a business credit card to book flights, hotels, rental cars, meals and more while conducting business on the road. The next thing you know, they have run up multiple purchases that should have come out of their own wallet.

When such instances occur, employees may be caught immediately by someone else in the company who is keeping an eye on expenses, or they could go for some period of time before their game is discovered. Either way, the potential is there for businesses to not only lose money, but also the trust of customers who view such actions as a lack of overall leadership.

 

Losses to Small Business Add Up

According to a report from the Association of Certified Fraud Examiners (ACFE), it takes on average more than a year for a business owner or co-employee to nab the in-house criminal who is stealing from the company. Meantime, ACFE reports that small businesses (those with less than 100 employees) on average suffer a median setback of $147,000, compared to $100,000 for those businesses with 1,000 or more employees.

Some of the reasons losses at smaller businesses can go unseen for a while include:

* Less oversight because the small business owner is occupied with dozens of other responsibilities to keep his or her business running;
* The person in charge of the office credit card is oftentimes the person who is also doing the office books;
* Fewer employees means less chance of getting caught.

In order to lessen the chances of such crime at your small business, make sure you:

* Check the books yourself or have someone outside the company do it on a regular basis to look for any irregularities in spending;
* Make sure even the smallest of expenditures are accounted for and documented. Whether an employee is buying new ink toner for the office copier or spending a weekend in Las Vegas to meet with new clients, everything needs to be properly recorded;
* Do a thorough check on each employee you hire to make sure they have no criminal past, especially where it involves money (do not just assume that everyone who checks off they have never been convicted of a crime on their application is telling the truth);
* Have a meeting with your employees once or twice a year to inform them of the consequences of such actions, including possible loss of employment and/or jail time (meaning you will press charges).

With all that you potentially have to lose from even one serious incident of credit card abuse in your office, are you willing to take that chance?

Photo credit: insuranceproviders.com

Dave Thomas covers small business topics for various websites, including processing credit cards.

Just How Secure is Your Business?

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For the small business owner that has to deal on a daily basis with making a profit, keeping up with the latest in products and/or services in their industry and taking care of his or her customers, worrying about security should be the last thing on their mind.

That being said, many small business owners do just that, wondering if their business is susceptible to a number of forms of theft.

From a physical break in to stolen data, business owners are finding more and more that security needs to be one of if not their top priority. But can internal threats be just as dangerous if not more than external ones, especially given today’s troubled economy?

Just as you would want the best home security system to protect your family and possessions, having a security system in place on the job is critical too.

So, for the small business owner who is not sure where to start, what should they look for in order to protect all they have worked hard for over time?

The first order of business should be to complete a Threat and Risk Assessment (TARA), allowing you to decide the best security route to travel. Take the time to look at your company’s assets and decide what their value loss impact is. Next, look to see what possible threats are facing your business, be they from the outside or possibly within. Lastly, put in place the needed procedures to make your business as secure as possible.

If you are wondering just who may be a threat to your small business, consider the following:

* Outside threats – The most common threat comes from the outside. Many thieves will scope out a small business first before striking, so look for any unusual activity with people who come to your place of work. Are they there for actual business, or are they there asking questions and trying to get a feel for your operation? If you have customers coming into your business on a regular basis, it makes sense to have security in place such as cameras and detectors at entrance and exit points to curtail shoplifting. Proper office security should also be a priority to protect your employees while they come and go, meaning the proper lighting and locks for the building space you own or rent.;

* Inside threats – Especially given today’s challenging economy, it is not unheard of to find small business owners finding criminals right under their noses. Whether it is someone stealing funds or property from the company, in-house theft can cause major financial repercussions for the small business owner. In some cases, the theft/s may go unnoticed for some period of time, meaning the company’s financial stability can be greatly impacted by the time the crimes are discovered. Make sure employees with access to company funds, computers and other items are properly screened before hiring. Consider using tools such as performance review software from Halogen” to track employee performance and ensure that no suspicious behavior arises. Only give out office keys to those who truly need them to enter and leave the building;

* Threats from competitors – You may think your business is immune from threats from the competition, but guess again. Whether it is spreading untrue rumors about your company or actually doing something physically to tarnish your business like stealing your property, you can be financially impacted from actions by your rivals. Let’s say you run a weekly newspaper and you fill the local vending machines with your product each Friday. After filling up the machines, readers call to report they can’t find your newspaper in the machines. It may not be a case of the product was so desirable, but rather your competition had someone go around and empty the machines minutes after you filled them. As a result, readers can’t get the news they want, the coupons you supplied in the publication, while advertisers are upset people are not seeing their ads. The trickle down effect can harm you before you know it;

* Cyber threats – As more and more business finds it way onto computers, is your small business properly protected? According to a 2011 survey from Symantec and the National Cyber Security Alliance, 85 percent of small business owners thought their company was safe from hackers, viruses or a cyber-security attack. That being said, a whopping 77 percent did not have a formal Internet security policy for their workers, while 49 percent failed to have an informal policy together. Data theft can be a major problem for the small business owner who does not have the proper firewalls in place. Not only can company information be compromised, but customer data can be stolen. When the latter happens, customers are not only upset, but are more apt to take their business elsewhere. Make sure that not only are you protecting in-house business information, but also have security in place when it comes to online customer transactions and more.

Given you would not leave your home susceptible to theft, can you say the same for your small business?

Photo credit: Stealbreaker.com

About the author: With 23 years of experience as a writer, Dave Thomas covers a wide array of items from starting a small business to hiring the right employees.