Fraud now seems to be everywhere. According to a report by PwC, about half of people in business experienced at least one case of fraud in 2020. To make it worse, the average number of fraud cases is six per company.
Unfortunately, this loss is orchestrated by people close to the organization. Employees, executives, and managers are at the center of fraud activity. Studies show that organizations lose more than 5% of their revenues through fraud.
As a business owner, you cannot sit and watch when your company is suffering from fraud. You need to introduce some fraud reduction strategies. You can learn how to prevent fraud in business by following these tips.
Incorporate Fraud Reduction Financial Technology
There are different types of fraud in business. Some of these frauds are high-tech.
If you’re not conversant with technology, you’ll not be able to detect or prevent such frauds. That is why you need to learn more about financial technology. It will help you to deal with such problems.
Understand Financial Reporting
If you want to learn how to prevent financial statement fraud, you need to understand financial reporting.
There is a perception that many people don’t understand financial statements. Those in the financial department take this opportunity to provide false documents.
As a business owner, it is necessary to understand such documents. You’ll easily reduce fraud brought through financial documents.
Conduct a Background Check
Small companies do not conduct background checks. They hire employees without prior knowledge of their background.
However, detection and prevention of frauds should start when hiring. Conducting background checks helps business owners to understand who they are hiring. If a candidate has a history of fraud, it will be necessary to avoid hiring them.
Conduct Social Media Audit
Social media is now an important tool in the hiring process. It provides more information about the character of the employee. You can get a personal trait that is hard to spot during interviews.
Some employees can be easily brag about fraud issues they were involved in their previous businesses. Others can have animosity towards their former employers. This is a trait that you need to avoid in your organization.
Train Employees on Fraud Detection
Sometimes you cannot fight the fraud battle alone. You need to bring employees into this fight. However, you must first train them.
Some workers are very loyal to their employers. They will not entertain fraud against their employers. But first, they need to know how to detect fraud incidences.
Introduce Anti-Fraud Policies
Companies are introducing anti-racism policies. Others have policies against gender-based violence. You can have an anti-fraud policy in your organization.
This policy should spell how each employee is supposed to behave. It should classify fraud as a criminal offense. All workers should understand the outcome of participating in fraudulent activity in the organization.
Encourage Whistleblowing
Whistleblowing has been an underhand technique in very many organizations. It is used to detect various issues done with secrecy. You need to introduce whistleblowing in your organization as well.
Encouraging whistleblowing is not one of the best methods of building corporate culture. However, you have no option other than to make it official. However, introduce some protocols that employees should follow when reporting fraud.
Improve Internal Accounting
Internal accounting is one of the sources of fraud in the business. Through this area, very many organizations have collapsed.
You need to improve your business operations. Having a single person handling all accounting issues helps your business to save money. However, it can open fraud opportunities to that person
You need to have improved internal accounting control by having different individuals handling different accounting roles.
Prepare for Cyber-crime Fraud
Cyber-crime is one of the leading sources of fraud in companies. This is an issue that is gaining momentum around the world. Every day, there are headlines about companies facing cyber-attacks.
Identity theft, credit card theft, and account takeover are some of the cyber-crime issues you should expect.
Introduce firewalls in your systems to prevent cyber-crime activities. You can also train employees on how to detect and deal with cyber-crime issues.
Know Your Customer
Customers can also orchestrate fraud against your company. They may order goods and pay through fake checks. Others may refuse to pay.
Always understand who you are selling your goods or services to. Conduct background checks on your customers. Avoid dealing with customers who have previous fraud issues.
Have Systematic Banking Strategies
Banking strategies that many companies have been using are open to fraud. Employees can exploit the weaknesses in banking strategies to fraud the organization.
Control every aspect of banking in your organization. Have different individuals handle banking on different days.
Sometimes do banking activities and analyze your accounts. Also, reduce cash in your organization.
Know Your Assets
Many business owners are only concerned about cash in their business. They do not check the assets owned by the business. This makes all the assets in the company vulnerable.
In addition to taking care of cash, you need to take care of other assets. You need to have a detailed understanding of your assets. You should also analyze them regularly and make sure that everything is available on any given day.
Set Aside Resources to Fight Fraud
You can’t reduce or fight fraud without sufficient resources. You must use resources to protect your resources. It is expensive in the short-term but very beneficial in the long-term.
Sometimes you can have fraud detection experts training your workers. Resources set aside can be used in purchasing modern technology to deal with fraud. Without resources, it will be an uphill task.
Get Help From an Expert
Sometimes your strategies might not be working. You could be doing everything, but numbers are still not adding up. In this case, you need help from an expert to handle fraud reduction.
Having CPAs audit your financial documents can help in unearthing some fraud issues. You can have Certified Fraud Examiners to help in investigations and possible prosecutions.
Is this article help you reduce fraud in your business? We have other similar articles on our website that can help you in other financial-related areas.
