how to prevent business fraud

How to prevent business fraud


Protect your assets: how to prevent business fraud

Small businesses need to be extra vigilant about fraud, from embezzlement to negligent misrepresentation. Learning how to prevent business fraud is something every entrepreneur needs to educate themselves on. Small businesses are very susceptible to employee fraud, as they often don’t have the anti-fraud controls or policies that are in larger organizations. Use these tips to avoid fraud right from the hiring process. 

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Conduct A Background Check

Small companies usually don’t worry about carrying out background checks when they hire new employees, which means that they are opening themselves up to hackers, predators, or even convicted criminals. Before you hire anyone, you should carry out a thorough background check that goes back a few years to see if there is a history of criminal activity. 

Run A Credit Report

With a signed release, you can check the credit reports of new employees for any signs of financial irresponsibility. This is especially important for anyone who will be working in a financial role. It’s not a problem for staff to have some financial stresses, but a comptroller who has filed for bankruptcy is probably not a good idea. 

Tip On How To Prevent Business Fraud: Do A Social Media Audit

Once you have someone you are thinking about hiring, take a look at their social media accounts to see if there are any red flags. Look out for anything that could cause damage to your business’s reputation, especially things like animosity towards a former or current employer. 

Implement Policies To Protect Your Reputation

Put in place an employee policy that outlines their expected behaviour when they’re representing the company, including any mentions of their work on social media. 

What Are The Different Types Of Business Fraud?

There are five main types of business fraud that could impact your business. 

  1. Identity theft. A fraudster could steal your business identity and access your credit. They could get access to your tax ID or financial statements. This information can be lifted straight from your computer. 
  2. Payroll fraud. This is more common in small businesses, but it can happen at any size. Employees might ask for paycheck advances and not pay them back. They might lie about their worked hours or ask co-workers to clock them in and out. Using a payroll service lets you approve everybody’s time before they’re paid to help prevent this. 
  3. Fake money. You could be paid with fake money. There is more fake money circulating than most people realise. You need to learn how to spot fake notes so you can refuse it. 
  4. Returns. If your business deals with goods, you might have customers buy items, use them, and return them, even though there is nothing wrong with them. Always require a receipt and put in place a strict returns policy. 
  5. Workers’ compensation. A business owner needs to purchase worker’s compensation. This insurance will pay an employee if they are injured at wirk. Companies need to stay on top of health and safety, and what happens in your workplace to help to prevents this kind of fraud. If an employee claims that they were hurt at work, check the injury actually took place there.

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  • Currently located in China, teaching English and working towards Financial Freedom. I write about money, travel, personal development and more!


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