Four low-cost strategies to fight the high cost of fraud

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In 2018, 29% of fraud cases occurred in small business and have losses twice as much as large business1. The good news is that you don’t need a big corporate budget to reduce your risk to business fraud.

According to the Association of Certified Fraud Examiners (ACFE), there are four fraud prevention measures a small business can put into action inexpensively. These strategies can help reduce the risk and impact of fraud on your business. And provide the basis for a documented fraud protection plan and procedures.

1. Educate your employees

Your employees are on the front lines of your business and can be your best defense against fraud if they know what to look for. Promote fraud awareness throughout your organization by providing information about common cyber fraud tactics your business could be vulnerable to. Discuss how fraud harms your organization, such as lost revenues, decreased productivity, and damage to your reputation. And be sure employees know how business fraud can affect them as individuals, in terms of decreased salaries, loss of bonuses, possible layoffs, etc.

Check out The Association of Certified Fraud Examiners’ website for tips on developing an effective anti-fraud training program for your employees.

2. Establish an anti-fraud culture

Creating a simple anti-fraud policy for your business sends the message that fraud is on your radar and won’t be tolerated. Your policy should include a list of actions that constitute fraud and what happens if someone gets caught. And, because 30% of small businesses detect fraud by receiving a tip1, it’s important to provide a secure, anonymous means for reporting any suspicious activity. Your reporting process will be most effective if it is free to use, easily accessible through a variety of channels, and available 24/72. If you take steps to engage employees, vendors and business partners, you can help make your business a no-fraud zone.

3. Stay involved in your company’s finances

The more you are engaged with the day-to-day financial operations of your business, the more likely you’ll be to detect or prevent fraud. Stay on top of your company’s bank balance, expenses and revenues on a monthly basis. Know what it costs to run your company. This will help you recognize when expenses seem too high or revenues seem too low. Engage your financial experts in identifying red flags when it comes to the numbers.

For tips on financial management for small businesses, visit The Small Business Association (SBA).

4. Talk to your business partners

Your lawyer, accountant, banker and IT person are some of your best resources for detecting and preventing fraud. They are usually well trained in spotting fraudulent activities and can offer suggestions for protecting your business. And because they are familiar with your business and how it operates, they may be able to spot vulnerabilities you haven’t identified and provide solutions to lower your fraud risk.

For more information on how to prepare and protect your business against fraud, refer to Webster’s Fraud Awareness Checklist. You can also leave a comment below, or contact me directly.

1. Report to the Nations on Occupational Fraud and Abuse, 2018 Association of Certified Fraud Examiners, Inc.

2. Developing an Integrated Anti-Fraud, Compliance, and Ethics Program, 2020 Association of Certified Fraud Examiners, Inc.

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General Disclosures

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.