What if we told you that small business fraud can cost you about five percent of your revenue in a given year? You would probably be pretty eager to prevent that, right?
According to the Association of Certified Fraud Examiners Global Fraud Study, that dire reality exists for businesses across America. As a small business, you’re not well-protected by the anti-fraud controls enjoyed by some larger corporations, and that makes you particularly susceptible to the threat.
We have several tips that can work to protect you, no matter how small your business is. Here are five ways to prevent small business fraud:
1. Establish a Code of Conduct
Employees are less likely to attempt to defraud you if clear rules and expectations are formalized, written down, and enforced via a zero tolerance policy. We’re not advocating for a code of conduct that will terrify your employees, but they shouldn’t feel like there’s wiggle room in your company policies for them to be shady.
2. Create an Anti-Fraud Policy
Once you have a strong code of conduct in place, build a comprehensive anti-fraud policy off of that document. This will help you detect fraud by letting employees know who to tip off if they suspect something is wrong. And this part is key because as of 2014, only 29.6 percent of small businesses experiencing fraud were warned of it by employees.
3. Create Anti-Fraud Training Programs
Once employees are aware of your policies and anti-fraud programs, you’ll want to train them. This serves the dual purpose of ensuring employees understand your commitment and plan to stop fraud in the organization, and it also discourages employees who might think about fraudulent activities by giving them insight into how seriously the business takes the problem.
4. Set Up an Anonymous Tip Line
Companies with reporting hotlines have better luck with detection of fraud, as the ACFE survey clearly shows: Hotlines can reduce the amount of fraud at a company by up to 40 percent. This fraud hotline service is available at an annual cost of $500, which is far less than the costs associated with being defrauded.
5. Don’t Store Pre-Printed Checks
If you store and use pre-printed checks, you’re elevating your fraud risk level by a considerable amount. Even with tight inventory controls, exposing your bank account information to many employees is asking for trouble. By using a combination of blank secure check stock and check writing/printing software, you’ll have a much safer way to fill out, sign, and print your checks—one that can house all your important information while maintaining control on your MICR checks.
We know small business fraud is not easy to prevent. But following these steps can help you crank up security and strongly discourage employees from the kind of behavior that can cost your business money. Ultimately, given the tight profit margins for every small business, that’s a seriously worthwhile effort.