Moderately-sized companies are already struggling enough in the fragile economy, and getting ripped off can be a crippling blow.
Fraud of American companies isn’t pocket change: a 2008 survey by the Association of Certified Fraud Examiners estimated that U.S. organisations lose 7% of their annual revenues to fraud — nearly $100 billion in 2008. The damage is the worst among small businesses, where the median loss suffered by organisations with fewer than 100 employees was $200,000.
True, the time and funds it takes to to prevent fraud can seem intimidating. But taking basic precautions and making a small investment early on can pay big dividends.
“Even though time and resources are scarce when you’re a small business owner, you should make fighting fraud a priority because, in a tough economy, you literally cannot afford to fall prey to scammers,” says Alison Southwick, a Better Business Bureau spokesperson.
“Preventing and deterring fraud is much more effective than trying to recover losses after the fact. The economy is showing signs of recovery, but damaging fraud schemes can compound the financial woes of a struggling organisation,” adds Bruce Dorris, ACFE’s program director.
So, what to do? Leaving aside employee fraud, here’s a brief guide to protecting against outside threats.
A critical step in fraud prevention is taking the time to check things out.
ACFE notes that high risk areas like financial or inventory departments are 'obvious targets for routine audits' and recommends surprise checks of those and all parts of the business. A good checking strategy is the ACFE's Fraud Prevention Check-up guide.
Another tactic is establishing a fraud hotline. According to ACFE (via BofA), companies with fraud hotlines cut losses by approximately 50% per scheme.
Bank of America notes that speed counts, especially in electronic frauds. That means checking your online accounts often and notifying your bank -- and even law enforcement -- immediately. You may even want to hire one of ACFE's Certified Fraud Examiners if the attack is particularly damaging.
The implementation of anti-fraud controls can save you lots of money. Not convinced? The findings of the ACFE study showed that there were significantly lower losses with precautions in place. For example, organisations (including large companies) that conducted surprise audits suffered a median loss of $70,000, while those that did not had a median loss of $207,000.
So read up, put some basic precautions in place, and give things a regular sniff test. Who knows -- it might just save your small business.
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