It’s a staggering reality – the smaller your business is, the more money you’re likely to lose in a fraud scheme. According to the National Federation of Independent Business, the average small business loses $190,000 from a fraud incident, more than the largest corporations in America. There are several reasons it’s so easy for small companies to be victims, and you can probably guess most of them: lack of money for security measures, employees performing multiple tasks across several departments, and inexperienced workers.
Fraud can occur in any aspect of business, from employees to purchases and everything in between. It’s unfortunate that preventing crime and shrink is such a big part of getting your company off the ground, but these days, you can never be too careful.
Employee Fraud
Once upon a time, fraud was evenly split between inside and outside sources. But for the past decade, employee fraud has been rising steadily, and now it accounts for nearly 80 percent of cases. Small business owners tend to trust their employees more than large corporations. In many situations, your staff may have been around since the inception of your business and helped you build it from the ground up – how could these people steal from you? But psychologically, the ease of access to inventory and information can create workplace thieves out of people who never before considered themselves corruptible.
It’s important to use security measures to keep your inventory and vital documents protected. Keypad locks are one major feature of security systems that deter employee theft because when an employee has to enter a code to unlock a door, you’ll know exactly who has entered the room.
Other types of employee fraud like skimming cash or tampering with checks can be solved with security cameras and a strong division of labor – the person who enters employee data should be different from the person who manages payroll, and so on.
Customer Fraud
When you install your security system, such as the ones found at securitysystems.net/frontpointsecurity.php you’re probably imaging the cameras will deter burglars or leave you solid evidence in case of a crime. But security cameras are also to prevent customer dishonesty. With the majority of lawsuits affecting businesses that make less than $1 million annually, it’s easy to fall victim to frivolous and false claims of injury, harassment, or otherwise unsafe conditions. Security cameras can provide evidence against these suits.
You can also monitor shoplifters and customers who engage in false return schemes – a good reason to require receipts before you accept returned items and keep a close eye on your inventory.
Your employees should be properly trained to look out for suspicious activity and document every transaction correctly. If they know what your security measures are and how to use them, they can help you prevent crimes before they happen.
Third Party Fraud
You also have to watch out for scams perpetrated by vendors and contractors that are employed by your company for different reasons. Ensure that they have actually completed all the work they bill you for and supplied all the equipment you ordered. If you have to give a vendor access to a security code, make sure you change it after their work is finished. If you maintain an office instead of just a retail store, you also invite the threat of cyber fraud.
The security measures you take for your computer network can involve a whole new set of considerations. When you create your IT system, you need to lay down strict rules for your employees, especially considering outside internet use which can invite viruses. It pays to invest some time into understand your state’s hacking and phishing laws, because you don’t want to be held accountable if a fraudulent system user steals a customer’s or employee’s identity.
In most cases, you’re required to inform a victim of potential identity theft, and a breach of cyber security can result in a snowball of lawsuits you really don’t want to face.
Many small businesses have begun to employ outside auditors to routinely check on their security and practices. These companies can look over your accounts and inventory, and if your business is big enough, you might even be legally required to hire one. Even if it’s not, you can do routine internal audits to make sure all the processes you set in place are being used to their full potential.
Get help with organization and documentation as soon as possible. The right accountant, IT manager, and even cashier staff can go a long way to preventing fraud no matter how big the budget for your company really is. Avoid too much middle management. When everyone is on the same page, you’ll be able to keep your business secured and your profits in the green.
About the Author: Chelsea McCary is an avid business blogger. Check out more of her articles on running a small business at @ChelseaMcCary.