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According to a report published by the Society for Certified Fraud Examiners in 2016, 30% of frauds occurred in small businesses with less than 100 employees. Small businesses have less anti-fraud reins in place than large organizations that make them especially defenseless to fraud. Frauds are common in small businesses because they lack special security check-ups and foolproof systems. A small business may have installed accounting software but the accounting software for small business may lack many security features reserved for software purchased by big corporations. A simple reason for this is the price difference in this software and many business owners go for the cheapest option. 

If a small business owner has a stellar accounting software, the chance of fraud still remains, unfortunately. In small businesses, many times a single person is entrusted with operating all of the accounting and bookkeeping functions. Passing all of the bookkeeping into the hands of a single person is a major reason for small business frauds. 

This person in a small business, in charge of all of the accounting and bookkeeping functions, is most likely the most trusted employ in the company.

Best Employee or Fraudster?

Let us portray how the “best employee” could actually be stealing money from your business. If you find the following unusual behavior in your best employee, they could turn out to be someone different than you thought.

Unusual working hours

When there is a single employee performing all of the bookkeeping functions, they might have to work long hours. And, of course, most of the time, that doesn’t turn out to be a problem.  However, this routine could be a warning sign.

If an employee has a routine of unusual working hours, there is a possibility that they are involved in some kind of fraudulent behavior with your business bookkeeping. If the employee regularly leaves late and works overtime without asking for extra pay,  it could be a sign of some kind of “special interest” in your business.  Like most of us, you think this is going in your favor, but the case might be the complete opposite.

Refusal to leave bookkeeping tasks to others

If an employee is working hard for a company but is not willing to leave any accounting and bookkeeping work for others, a check on their activities must be kept. They might be involved in fraudulent practices.  If the employee refuses to allow others to look at their work or regularly gets offensive when asked about it, this is a warning sign.

Too much access

If you have given too much access to the financial bookkeeping of your business, your business is already at risk of fraud. A single employee should not be given all of the access to receiving cash, payments, tracking expenses and various other bookkeeping functions. Delegate employees for different steps of the bookkeeping management. There should be separate people for bank transactions, expenses, receiving cash from customers, paying bills, and bank deposits.

Your trusted employee is spending lavishly

If your employee starts spending more than normal, keep a close eye on their activities in your business functions. They might be involved in some kind of fraudulent practices. A fixed pay usually does not leave room for spending lavishly all of a sudden. 

How to Spot the Fraud

Difference in accounting statements

Whether you have an electronic system or your accounting statements are done manually on a register, the financial statements should match with the cash flow statements and balance sheet. In manual bookkeeping, there is always a chance of an honest error, but keep an eye on any difference in the number of accounting statements just in case.

Match the transactions with real bills and invoices

If there is more than one payment for a single bill, it again might be the case of fraud. Keep an eye on the bookkeeping in your business. Check the bills for duplication.


A business ready for an audit at all times is a business with lesser discrepancies. Conducting regular audits will discourage employees from committing fraud or theft as there is more of a chance they will be caught.


The concept of your “best employee” in a small business can be dangerous. If your best employ has any of the above suspicious behavior, it’s time to take the steps to ensure your business is safe. Dividing job responsibilities, reviewing all monthly reports, and limiting manual payments can actually prevent your employees to make the decision to go down that road.

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