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8 Fraud Prevention Tips For Small Business

You have heard it in the news, read about it in the papers, heard from your friends, seen it in the movies, but always thought that it won't happen to your business. Think twice! Wherever there is money, there will fraud! And as a small business owner or the CFO, it is your job to familiarize yourself about all threats to your business and to to create a safeguard against them. Here are top 8 tips that will help you prevent fraud at your business.

1. Understand Fraud

Fraud prevention experts have come up with the expression of "Fraud Triangle" which is a framework that explains why individuals might commit fraud at their workplace. It consists of three factors: 1. Motivation/ Pressure  2. Opportunity and 3. Rationalization 
Any of these three factors can force an individual to commit fraud. And the more factors an individual experiences, the more likely he/she will commit fraud.
For example, an employee is under financial pressure to pay the hospital bill for his beloved ones (motivation/ pressure), if there is no fraud prevention system in place at work (opportunity), and he rationalize stealing from work by telling to himself that "I am doing this only this one time to pay for the hospital bill, it it to save my ... life, and in future I will pay it back" he is more likely to commit fraud.

2. Employee Practice

As your business grows, you need to hire more employees quickly. A lot of time, small business owners just pay attention to the candidates' work experience and skip checking the references and doing background check. It is a good idea to get employee practice liability insurance (EPLI) to recover such losses from employee theft.

3. Fraud Training

Have regular training about fraud, so that your employees are informed. Sometimes fraud happens because the employee genuinely does not know that what he/she is doing is considered fraud. Fraud training would prevent such incidents and also deters those who are will to commit fraud on purpose.

4. Establish and Maintain  Strong Internal Controls

A strong internal control can profoundly help prevent fraud. A good internal control segregates duties among staff. By doing so, an individual who commits fraud cannot hide it, and his action will be reviled by other staff. For example, the person who receives cash and check from customers must be different from the person who enters them in the books, who in turn is different from the person who deposits them in the bank. Likewise, the person who can authorize writing a check should be different from the person who has the checkbook and different form the person who enters them in the book. This simple segregation of duties ensures that no one employee can steal from your business. 

5. Understand Your Financial Statements and Tax Reports

By understanding your financial statements and tax returns, you can have a better idea about how your business is doing as a whole and as sections, and you might be able to catch some irregularities by checking the financials, which can alert you about fraud.

6. Monitor Key Performance Indicators

Key Performance Indicators (KPI) assist managements run the day-to-day operation. Depending on the criteria, it can be reviewed hourly, daily, weekly, monthly, quarterly, or annually. By reviewing KPI you can find out about anomalies and take corrective actions in a timely manner.

7. Understand and Protect Against Cyber Risks

Technology is an inseparable part of any business these days. But as much as great opportunity it provides for businesses, it provides danger to the very existence os businesses as well. Cyber crimes keeps getting more sophisticated and more difficult to deal with with. There are thousands of businesses that are being victim of these cyber crimes everyday. These crimes vary from stealing personal information or your employees, vendors and clients, stealing your business information to open bank accounts and line of credits under your name, transferring money from your bank accounts, freezing access to the files on your computers, taking control of your website, ... 
In cyber security as in medicine, prevention is better than cure. It is much easier to stop hackers from getting access your computer and information than to stop them once they get it. In order to prevent hackers you must:
  1. Have a strong internal controls over data
  2. Regularly train your staff, so that they won't fall in the hackers' trap
  3. Create sufficient security to prevent unauthorized access to your systems
  4. Have a strong cyber insurance

8. Trust But Verify

As the Russian saying goes, "trust but verify". A good business owner must be able to delegate work to others in order to make more time for him/herself to grow the business and that requires trust. But a blunt trust can be dangerous and instead you must verify this trust every once in while to reassure that no one is taking advantage of your trust.

We can help

As a successful business owner, you should not spend too much of your time on logistics like cyber security. Let us handle this for you, so can better use your time to grow and flourish your business. For a first time free consultation please contact us.

Contact us

​Email: Info@Qtaxservices.com
​
Phone: (424) 888-3878
  • Home
  • Services
    • Personal >
      • International Tax >
        • Moving to the US
        • Australia >
          • SuperAnnuation
          • Informational Returns
          • Australian Rental Income Tax In The US
        • UK >
          • Informational Returns
          • British Rental Income Tax In The US
        • CANADA >
          • Informational Returns
          • Canadian Rental Income Tax In The US
          • CCP / OAS
          • How Can Canadian Save Tax While Working In The US
        • Other Countries
        • Exit Tax: Covered and Non-Covered Expatriates
      • Federal and State Tax >
        • Opportunity Zone
        • Section 83(b) Election
        • Zero Tax On Long-Term Capital Gain and Dividend
        • Sexual Harassment Settlement Taxation
        • Combining Code Section 121 and 1031
        • Gambling
        • IRS Scam
        • Real Estate Safe Harbor
        • Gift Tax Exclusion
        • Withdraw cash From C Corp
        • R&D Credit
        • After Filing the Return
        • Home Office
        • PPP-Paid Expenses
        • Special Charitable Deduction
    • Business >
      • New Business Entity Formation >
        • Different Types Of Business Entity
      • Payroll and Sales Tax
      • Virtual CFO >
        • 6 Ways to Drive Sales from your marketing
        • Fraud Prevention
    • FBAR >
      • FBAR New Penalties
    • ITIN Application
    • IRS Representation
    • Installment Agreement >
      • Fresh Start
  • Insight
  • Tax Center
    • Where is My Refund
    • Due Dates
    • Tax Rates - 2021 >
      • Tax Rate - 2020 >
        • Tax Rates - 2019 >
          • Tax Rates - 2018
  • About
  • Contact
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