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A businesswoman selecting a Fraud business concept on a futuristic portable computer screen.
The ACFE (Association of Certified Fraud Examiners) Global Fraud Study disclosed that a typical business loses an average of 5% of income each year because of fraud. Universally, this translates to deficits of roughly $3.7 trillion, according to anti-fraud experts.

Furthermore, other than lost income, there are also unforeseen costs. For example –  decreased productivity, low employee morale, tarnished brand images and ruined reputations, all resulting from personnel and employer fraud.

Despite such sobering fraud statistics, do not think that it is too late to acquire the latest information and implement proactive methods that avoid, detect, and investigate prospective acts of business fraud. There are facts that you need to be aware of concerning the different types of fraud performed in the workplace. In addition, you also need to learn what can be done to create powerful controls in vulnerable regions of your organization.

Small Businesses Suffer Bigger Monetary Losses

Although both small and large businesses fall victim to fraud, the ACFE discovered that businesses with fewer than 100 employees are most susceptible compared to their superior equivalents. Larger companies are more likely to implement anti-fraud practices, such as internal departmental audits, hotlines, and employee fraud training. In the case of smaller companies, they are less likely to execute similar anti-fraud measures that detect fraud sooner.

Fraud Creating a Monetary Impact on Businesses

According to the ACFE, cyber crime and identity theft (specifically credit card abuse) are among some of the biggest common means of fraud in small-scale businesses. Unfortunately, small companies suffer a bigger financial hit due to unscrupulous behavior in their business.

ACFE’s statistics reveal that thought corruption cases and asset misappropriation causes significant losses to businesses. The most monetary damage with a median of $1 million is due to financial statement fraud.

Another source of trouble for businesses looking to maintain insurance claims and costs is workers’ compensation fraud. The NICB (National Insurance Crime Bureau) has estimated that approximately 25%, or $7.2 billion per annum, is because of workers’ compensation fraud that businesses have to suffer. If a business takes a look at its bookkeeping records, they might be able to calculate the fraud statistics of their business specifically.

Battling Fraud in your Business

Research has shown that fraud is indiscriminate of industry, employer size, or geography. Therefore, it is vital to take active steps to avoid and mitigate the impacts of fraudulent activity.

CFE fraud experts indicate that the implementation of anti-fraud regulations supports to reduce both monetary losses and the duration proceeding from fraud schemes. Decreasing the spell of fraud is essentially critical because the lengthier the fraud lasts, the more financial damage it can cause to a business.

Best Practices for Detecting and Preventing Fraud

Some practices have proven to be particularly successful at detecting and preventing and fraud in businesses:

  1. Instituting an anti-fraud hotline
  2. Implementing a code of conduct and an anti-fraud policy
  3. Establishing fraud training and management review procedures for executives, employees, and managers
  4. Conducting surprise inspections
  5. Directing external inspections of internal controls utilized in financial reporting
  6. Applying systems that actively analyze and monitor company data

Though it’s certainly essential to implement and monitor anti-fraud restriction, not all of the anti-fraud processes are made equal. For example, the ACFE discovered that from the 80% of fraud cases reported, about 42% were identified via hotlines compared to the 3% that were found through external audits.

If you are unsure about which anti-fraud control to use in your business, consult with an anti-fraud consultant, a fraud examiner, or an auditor for advise on the measures that will be effectual for your business.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

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Protecting your business from cyber fraud requires you to be well prepared for tackling potential threats and dangers. Here’s what you need to know
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Undeniably, the stories of cyber fraud that once seemed startling are now non-stop and have a knack for repetitiveness. They are no longer a surprise due to the frequency occurring vastly. Many think tanks have come together to combat this menace but it was concluded that solutions largely depend on the nature of a business. There is no denying the fact that cyber fraud has become a sophisticated profession that is posing threats to organizations on a global scale. You may be shocked to know that cyber fraud is expected to cross $3 trillion by 2019, a five-fold increase from the 2014 estimate. It is also important to note that a significant portion of cyber fraud goes undetected, causing US organizations to lose billions of dollars each year.

Shifting the Scope and Dynamics of the Industry

Before the advent of the internet, criminals had to dig through a company’s trash and intercept their mail to steal sensitive information. Although, stealing in the past and initiating fraud required extraordinary lengths and creativity which often restricted fraudsters to do their homework prior to committing a fraud. This indicates that stealing from a company was relatively more difficult and time consuming with a greater fear of getting caught.  Times have now changed.

Cyber Fraud in Today’s Era

In today’s fast paced internet era, companies are more vulnerable to cyber fraud as information is readily available online. Fraudsters, criminals, spies and hackers use the internet to hack into company accounts, steal people’s identities, infect devices with viruses and trick others into revealing sensitive information. These hackers have invented different ways to break into company accounts and their pattern of stealing is hard to guess. A most recent example is the “WannaCry Ransomware”, which actually caused people to lose billions of dollars worldwide. This cyber attack affected more than 250,000 users in more than 140 countries. Unfortunately, hacking has turned into a very lucrative business encouraging crooks of all types to enter the market with respective vested interests. From petty con artists to organized international syndicates, it is definitely a top concern.

How to Protect Your Company from Potential Threats

The good news is that companies don’t have to spend thousands of dollars to protect their invaluable information and data. We will briefly focus on low-cost, low-tech tips to protect your business from cyber fraud.

Establish a Clean Desk Policy

Prevention of cyber fraud starts with protecting and securing the most susceptible assets, your staff. You must motivate your employees to adopt a culture of a clean desk policy as it can be a starting point for most cyber frauds. Institutions like banks and other regulated bodies need to establish a code for a clean desk policy prior to leaving the office. This is a simple and effective way to secure your sensitive data and prevent it from going out of your company. This may include data about employees, vendors, clients, contractors, insurance agents, outsource agents and all internal and external stakeholders.

Reconcile Balances Everyday

We are living in an era where we witness cyber crimes every day. For preventing a cyber fraud, we have no other option than to reconcile our balances and accounts every day. It is important to have proper checks and balances in place for keeping your business on the right track. Maintain and regularly check your bookkeeping records so that you are aware if and when fraud is happening.

Establish Vendor Policies

To set an ideal platform for ensuring growth and success, you need to establish vendor policies. Protect your sensitive information and secure your identities, as cyber fraud can cost you a lot and may kick you out of the competitive race.

Verify All Requests Prior To Transferring Funds

This can be done through establishing contact by phone or scheduling a one-on-one meeting. Never transfer funds or make payments without confirming urgent requests made by your customers, vendors, or any other person involved in the process. This may lead to cyber fraud or banking repercussions such as discrepancies in transactions and loss of funds.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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Regular inventory check, financial books audits, establishing a code of conduct, setting up organizational checks and balances, instituting policies and procedures, personally reviewing financial statements each month and other similar preemptive tools can be implemented in the business to prevent employee fraud and theft.

Unarguably, employee theft is costly to businesses. According to studies, businesses lose 9% of their annual revenues to fraud or theft and it causes American business owners to lose about $60 billion each year. Yes, you heard it right! The staggering figures bear testimony to the fact that employee fraud or theft has been on the rise in most parts of the world, America being on the top of the list. People are getting rightly concerned about the fate of their business, as they should be.

Protecting your business against employee theft and fraud is no easy feat. However, there are ways in which you can minimize fraud and prevent employees from stealing from you.

Establish a Code of Conduct

If you expect to maintain complete control over your business and its daily operations, you have to establish a code of conduct for your employees. Most successful retail establishments across the globe consider it a sole reason for their success. No business can tolerate any illegal or unethical activity towards new and privileged customers, vendors or suppliers, employees or the company itself. Therefore, it is safe to say that establishing a code of conduct can actually prevent employee fraud or theft.

Once employees would know the repercussions of their bad or opportunistic behavior, they will be more likely to avoid taking risks and stealing from you. Upon a successful hire, the code of conduct must be communicated, acknowledged and readily signed by new employees so that they will have less motivation to cheat or steal.

Plan Organizational Checks and Balances

Whether your business is small or large, setting up organizational checks and balances helps you to monitor everything on your own. It doesn’t matter whether your manager has been with you for the past 10 years, intentions can change at any time which means you should never delegate the entire responsibility of managing everything on to your manager. Your accountant may be a pro at bookkeeping and maintaining the financial books, but you, as an owner, should take an interest in tracking core things like the handling of deposits and payments, invoices and order emails, and transaction documents. By setting up a surprise or regular organizational checks and balances, you can easily prevent employee fraud or theft.

Institute Policies and Procedures

Effective organizational policies and procedures help prevent fishy activities from employees. Once employees know the pros and cons of following organizational policies and procedures, they will know the repercussions and abide by the rules and regulations of the company. In manual accounting, accountants usually have more control over credits and finances, which means there is an open opportunity for unethical accountants to steal from you by manipulating the financial books and records. This has to stop, no matter what, and you can prevent employee fraud or theft by introducing advanced or custom-made accounting software. By integrating accounting software, you can expect to manage your payroll and maintain a better control over the credit limits and finances.

Watch Employee Behavior

Where employees can turn things around for you and make you successful, they can also cause you to lose everything. No matter how much you trust them, you should always have a backup plan to discourage any unethical or illegal activity. If you notice suspicious things going on around you such as a misplacement of important documents, employees that are reluctant to help you, or giving excessive attention or discounts—look into it.

Stretching an extra mile to know your employees’ changing behavior will help you save a lot of money and help prevent employee fraud or theft. You can install CCTV cameras, track vendor invoices and important files, employ efficient accounting software, give employees’ fringe benefits and bonuses, arrange weekly/monthly workshops to help discourage unlawful or unethical activities and prevent employee fraud or theft.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Closeup portrait of shocked middle-aged business man staring at camera through glasses. Shock concept. Isolated front view on white background.
Employee fraud and theft is certainly a big concern for small businesses. Most owners don’t realize the impact a fraud could bring to their business and don’t believe it until they face the curse themselves. Small businesses have every reason to worry about fraudulent activities in their company. It can hamper and disrupt their working capital and, most importantly, their cash flow. Undoubtedly, small businesses are more vulnerable to employee fraud, theft, stealing, larceny, robbery, embezzlement – whatever you name it – because of ill-defined practices and processes and lack of business control. This indicates that lack of accounting knowledge and wisdom coupled with a lack of business management skills may land you in a real trouble.

Employee Theft and Fraud Can Lead to Lethal Repercussions—Are you Protected?

There is certainly no denying the fact that employee fraud can devastate your business. No matter how successful your entrepreneurial venture may be, a slight miscalculation in finances or wrongful business projections can devastatingly hurt your business. According to studies, US-based businesses suffer a staggering $150 billion dollar loss in fraudulent employee activities every year, out of which, 83% theft happens to be in small businesses.

Another trend that has been identified by the ACFE (Association of Certified Fraud Examiners) is that small businesses with fewer than 100 employees are more vulnerable to employee fraud which can even kick the business out of the competitive race. Why? Because of two core reasons; a greater degree of misplaced trust and a lack of basic accounting controls. If small business owners expect to stay competitive, they need to come up with effective and implementable loss prevention strategies in order to get their business going in full swing. Often times, those who steal from you are typically suspected least in the company because of their well established trust and faith.

What Should You Watch For?

In today’s era, catching culprits does not have to be that hard. Now, we have superior technology and practices that can help us prevent organizational losses and discourage fraudulent activities such as employee fraud. Blind trust can lead you to a complete failure or utter disaster. You need to track and monitor daily business operations and activities, especially the influx or outflow of cash flow yourself in order to keep things going in the right direction. The fear of losing cash and assets can cause anxiety and mental stress, which can be troubling for your health and your business.

Any significant behavioral changes in employee attitude, working abilities, or spending habits can be warning signs of chances of some kind of employee fraud. Sometimes, financial stress and pressure at home can also lead an employee to commit theft or fraud. Moreover, your employees living beyond their financial means can also raise suspicion, which needs to be investigated. Pure blind trust is a story of the past. Now, no matter how much trust you may have in your employees, you need to ensure that they are not stealing from you or committing fraud.

Ways to Protect Your Organization from Employee Fraud

Creating a written fraud or theft policy can help prevent employee fraud. This way, employees will know what fraud means to the company and what the repercussions will be if someone from the company is involved in any fraudulent behavior or activity. To set a precedent, you need to establish a code of conduct with a zero-tolerance policy in order to discourage such illegal activities.

You must have bookkeeping and accounting control so that you can make better business assumptions and decisions. If you have hired internal and external tasks of the business, you need to conduct an audit on a regular basis to know the actual financial conditions of your business.


Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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Many organizations and individual businessmen face fraud each year due to their employees or business partners. New entrepreneur start-ups and small businesses are more vulnerable.  Risk of fraud has increased due to the advancement of technology and progressive development of the world into a global village. The increased awareness of technological development and complex organizational structure requires the corporations to incorporate internal anti-fraud approaches to combat fraud. According to 2014 research reports by global nation organizations face 5 % loss due to fraud each year, in which 85 % of serious fraudulent cases were committed by internal employees. The organizations should develop multi layered fraud prevention strategies while keeping these statistics in view.

Eliminate all loop holes that facilitate employees by implementing these five fraud prevention strategies.

1. Corporate culture:

Corporate culture defines procedures and policies which govern employees. The organizational structure such as a reporting system, the accountable person, segregation of duties, job responsibilities and limitations should be clearly defined.

Hire the right employee by investigating their past employment history and educational background. All employees should know the tactical approaches which exist in their organization to prevent fraud. A documented policy which defines fraud, its prevention and detection policies should be implemented after proper training of all employees. Any kind of leniency or flexibility in misconduct or suspicious activities should be avoided.  This ignorance will lead to violation of policies, indirectly encouraging employees to plan a fraud. The Zero tolerance policy of all kinds of fraud should be communicated to employees. They should also be aware of actions which would be taken in case of fraud.

2. Internal controls:

Internal controls of systems and organizations defines the plans to prevent the company and its assets from any kind of fraud and theft. This system should be revised frequently to analyze its effectiveness. It should be regularly updated according to the new needs, development and advancements of a company. Internal controls should clearly define accountability and compliance.

Documentation is an integral part of an internal control system and the most important tactic for fraud prevention. All procedures and transactions should be documented to minimize fraud. Every expense should be approved and countersigned by a managerial level employee so that the validity of receipts and expenses can be ensured. Restrict all physical and technical approaches to documents and information.

3. An independent audit system

An independent audit team should be conducted for regular as well as surprise audits to check inventory and cash situations. Checking of vacation balances should be mandatory.

Annual and quarterly audits should be monitored by the audit committee. Results of an internal audit should also be validated by this team. 29% fraud cases are detected by audit teams, a report says. This team is well aware of risk factors for fraud and policies to prevent fraud. These also monitor the policies to be strictly followed to prevent the more risky procedures.

4. Effective reporting system to reduce fraud:

An effective reporting system should be developed. All employees should know how and where to report any suspicious activity. There should be an anonymous reporting system to report fraudulent cases because many employees are hesitant and reluctant to disclose their identity while reporting others.

All employees should be aware of the fraud prevention and reporting systems, and honest ones are encouraged to report.  According to a report, 40% of fraud cases are detected by tips given by employees.

5. Hire a professional fraud prevention expert

Certified fraud examiners could be hired as a part of a prevention program of fraud.  They play a vital role in generating and implementing fraud policies. They provide consultancy against internal and control audit systems and detection of fraud.

Conclusion:

Fraud in business can result in major financial loss, a huge waste of time and a ruined reputation. Implementation of multilayered fraud risk strategies leads to a successful strategic business corporate organization. Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.