Many businesses or almost all companies- either running on a small scale or a large scale, end up getting scammed, which leads the business to go into debt or face severe losses. Those scams or frauds can be committed by customers, suppliers, or employees. Frauds customers commit include fake billing, false claims, and receiving counterfeit money.
Businesses that run over the internet face fraud from customers the most. Those frauds are when a customer claims an appropriate and correct sale to be unauthorized by saying things like “the order never arrived,” “goods were damaged,” and getting a refund but never returning the product. A supplier can commit fraud by claiming that the goods they sell are high quality, hence asking for a suitable price when the products are of inferior quality. They are overcharging their customer (your business). A supplier may also overcharge the carriage on goods expense or overstate the quantity of inventory ordered to create a higher invoice. Types of frauds employees commit include; inventory theft, money fraud, cash theft, expense account theft, and commissions fraud.
A business can practice some activities to prevent fraud from happening from the company’s very beginning to make it a business culture.
This culture will also force the fraudsters to think twice before committing fraud, and creating awareness all over your business will also make them insecure about being caught, which can lead to fewer fraud attempts. A few tips a company can prevent frauds from happening in their business, especially in the accounting systems, are:
Create proper rules and a code of conduct. Having appropriate and written policies means that it would be illegal for any employee to perform suspicious activities. The managers and business owners should create anti-fraud policies and include how to deal with a crime or fraud. Make it clear that you will punish any employee who commits fraud.
Keep your employees under your supervision. Give your employees complete independence over being in charge of their tasks and doing their jobs. It will provide them with an opportunity only to perform tasks that they want to do, and they won’t be as productive as you expect them to be, and they can also be dishonest while stating their working hours or their productivity. Companies must make sure that the employees do the job they are assigned to do, and the reason as to why you hired them is to be satisfied.
Identify the weak spots of your business. Determine what areas your business is facing the most fraud over the most. Identify what makes the fraudster target your business quickly and then find a solution to protect it or keep it under strict supervision. Identify any suspicious activities happening within your business and focus on that area more than the others.
Conduct audits. Have your business audited or have a CPA in the company, then ask them to conduct surprise audits. Audit procedures also include fraud detection, performing journal entry testing, inspecting accounting estimates, and checking unusual and suspicious activities or transactions. An auditor is skilled enough to detect fraud relatively quickly compared to people with less accounting experience.
Be aware of your financial systems. When entrepreneurs do not have enough experience in accounting, they hand over the whole accounting system to an accountant. They do not concentrate on any of these activities. An accountant can easily take advantage of this opportunity and commit fraud. An entrepreneur should know what is coming and going in and out of business and review all the income and expenditure to ensure that all transactions are correct and match the business’s operations.
Businesses need to detect and prevent any fraud from happening to avoid unnecessary debts and expenses. A company should pay attention to the signs of fraud and ensure they reach the primary source of the scam to treat it accordingly.
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