One common misconception among small business owners is that fraud prevention is expensive. And like anything else in this world, it can be expensive. A company that strives to eliminate virtually all opportunities for fraud by employees can spend a chunk of money doing so.
But it’s not always necessary to spend lots of money on fraud prevention. And it’s not always possible for a small business owner to spend a lot on fraud prevention. Let’s face it… budgets are tight and big new projects aren’t often possible.
Small businesses do not need to sacrifice fraud prevention efforts all together. There are simple ways an owner can protect the company, and they carry little to no cost to implement.
Educate yourself about fraud: You must have a clear understanding about how and why fraud occurs if you are going to prevent it. This means reading about some basic fraud motivators and opportunities, as well as some basic prevention techniques.
Hire the right employees: Although most employees who commit fraud against their employers do not have any prior charges or convictions for fraud, it still makes sense to attempt to weed out bad employees. This means having an effective screening process that includes thorough interviews, background checks when permissible, and verification of past employment and references.
Ask yourself how you’d steal from the company if you were an employee: Take a hard look at your company’s operations and processes. Are the obvious opportunities for theft and fraud? Are there weaknesses in your system that would make it easy to steal? Do you lack proper supervision of areas at risk for fraud?
Educate employees about fraud: If employees understand fraud and know some of the basic warning signs, they will help you uncover problems at your company. A tip from an employee is one of the most common ways that fraud is detected. Offer your employees the tools to help you prevent and detect fraud.
Get involved: One of the most common mistakes in small businesses is a hands-off approach by the owner. Often the owner is heavily involved in the sales and marketing process and leaves the financial responsibility to the bookkeeper or office manager. That is a recipe for disaster. The owner must be regularly involved in overseeing the money, so that employees know their management of the finances is being supervised. Open the bank statements, regularly review expenditures to make sure you’re paying the right vendors, and make yourself aware of what’s happening with your money.