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Tips to Avoid Business Fraud
Both the small and mid-sized business are vulnerable to business fraud than the larger organizations are. The effects of fraud on these organizations are more damaging. The types of frauds that occur such organizations are usually categorized in three areas. They can be theft related, financial statement fraud-related or can be asset issue types of fraud in the organizations. Theft, however, makes up the most common type of fraudulent activity. It is also known as the misappropriation of assets.
Thefts in business organizations happen in different ways. At types, they occur through stealing of money directly or can be claims of vague and irrelevant expenses. You might be asking why the small and the medium-sized business are at great risk to these kinds of fraud. This is because of several factors. Employees might be performing many functions in the company. There might be a lack of close oversight on the organization’s activity and the less expertise in the financial matters that will make money disappear unnoticed.
In this article, therefore, we provide small and medium-sized businesses with tips that can help them come up with the avoidance of fraud. These tips will also help you detect fraud as soon as it sets to happen.
The first thing is the segregation of accounting duties. Due to their size, most of the small businesses, have this one person handling the bookkeeping functions. Fraud, therefore, can go unnoticed since they will prepare the procedure and work on the cover-up. There should be at least two people in the accounting department. They should as well handle the functions interchangeably. This means that they can realize the faulty works and functions by the other partner. Accounting operations and handling the cash in the business ought to be kept very separate from each other.
Knowing your employees will save you a lot of trouble. Dispute the skills set, they are still humans. It is essential to understand the background of your employees. Every business wants to hire honest employees through a formal hiring routine. Background checks ought to e performed on all the employees. As the employees raise the ladder on the cash management in the company, the scrutiny on their past should as well increase.
Do you have internal control operations? Every small and medium-sized business has a need to control and create as well as maintaining internal controls. This is very important when it comes to detecting and preventing fraud in the organization. Through this, you can have a restriction of access to financial account data to the organization’s staff.
The audit is the best method to detect and identify fraud. The regular business audit is critical in any business. A business ought to have a routine audit of the area dealing with cash, refunds, and the product returns. It’s essential to set up an internal audit team or hire professional’s external auditors in the organizations.
Finally, protect employee training on the detection of fraud is essential. They should be sensitive to detect unscrupulous business. Having an anonymous reporting system in the organization gives and sets your mind at ease when reporting fraud.