“It could never happen to us.” When it comes to fraud, these are all too often the famous last words of small business owners. But fraud can happen to or within any organization. And any instance of fraud has the potential to be devastating. Thankfully, there are some fairly straightforward and inexpensive steps you can take to prevent it. 
Here are seven basic fraud prevention measures (i.e., controls) every business owner should follow.
Segregate duties as much as possible.
Segregating duties involves making sure one person doesn’t have sole authority over any one process, which can be difficult when your employees wear several hats. But ignoring this control could be a recipe for disaster. For instance, someone who has the authority to prepare and authorize transactions should not be in charge of reconciling those transactions. Likewise, the person who signs a check should not be the same person who prepares it. Being aware of areas where duties may not be as segregated as they should be—or identifying new opportunities for segregation—is a critical step in keeping fraud at bay.
Pay attention to cash processing activities.
Cash processing is often where the biggest risk for fraud lies in small businesses. But you can mitigate it by monitoring these activities. Best practices include regularly reviewing online banking activity, and having physical bank statements mailed directly to you, the business owner, rather than to an employee at your business. In addition, avoid writing checks out to ‘cash’ and consider requiring dual signatures on checks or wire transfers over a certain dollar value.
Be smart about email fraud schemes.
Email fraud schemes are becoming more and more rampant, and criminals are growing bolder and bolder. While email-filtering software is designed to catch fraudulent emails, many fall through the cracks. For these reasons, it pays to be vigilant. Always be suspicious about any email you receive asking for banking information or money, and take appropriate measures to verify the authenticity of the sender. It’s also important to keep your computer security and firewall updated, and to only download files from known and reputable sources.
Take advantage of Positive Pay.
Most banks offer a tool called Positive Pay that matches checks written by a business against those the business has previously authorized. It can detect fraudulent checks and prevent them from being paid. If you’re not taking advantage of this service, talk to your banker and set it up as soon as you can. It’s an easy way to guard against fraud—before it touches your bottom line.
Implement sound hiring and training practices.
Preventing fraud starts with hiring honest people. Always insist on a background check, and be sure to call references of potential hires. Once your carefully screened employees are on the job, make sure they are trained in fraud prevention to allow them to serve as the eyes and ears of your company.
Send a strong message: Fraud will not be tolerated.
The fear of getting caught can be a significant deterrent—don’t be afraid to let your employees know they’re being watched. And if fraud happens, deal with it appropriately. Everyone should be aware of the consequences.
Resist the temptation to put fraud prevention on the back burner.
Implementing basic fraud prevention measures as soon as possible is an investment in the long-term viability of your business. If you have questions about any of these controls and how they might work for you, don’t hesitate to give us a call.