“Back office” and other types of financial fraud are rising at U.S. companies, and are hitting small businesses especially hard. Fraud experts point to the lingering effects of recession, cutbacks that have eliminated financial checks and balances at many businesses, and simple complacency as key reasons.
According to Joseph Wells, a CPA and founder of the Association of Certified Fraud Examiners, these three major risk factors can lead to fraud in a small business:
• Inadequate screening of employees before they are hired. Doing background checks is advised.
• Inadequate financial controls around record-keeping, bank accounts and how cash is handled.
• Too much trust. Sadly, the very thing that makes a small business a nice place to work also helps thieves succeed.
Some common back office fraud schemes include billing for nonexistent goods or services, creating fake vendors, writing checks to dummy businesses or taking kickbacks from vendors.
A recent survey of small-business owners by TD Bank, one of America’s 10 largest financial institutions, found that 75 percent are taking at least some steps to protect themselves against financial fraud. But most aren’t doing nearly enough.
“It pays to be vigilant,” says Robert Dunlop, who heads corporate security and investigations for TD Bank. “Given the influx of new technologies available to small-business owners, it’s important to learn about the latest techniques used by criminals, and to be more diligent in defending against fraud.”
Here are a few tips for protecting your business against financial fraud:
• Employ financial checks and balances. Perform an internal review of company finances monthly. Make sure payment amounts match all invoices, and check for missing documents. Running random audits or having a third party audit the books yearly shows employees that you are serious about fraud and deters would-be thieves.
• Protect computer systems and practice Web awareness. Being complacent about cyber protection has cost many small companies dearly. Every computer should have the latest firewalls and anti-virus software. Beware of “phishing” schemes that try to obtain confidential information from you or your employees. These usually take the form of an email that appears to be from a financial institution or service provider, but is fraudulent. While most are easy to spot, some contain enticing headlines or appear to come from a legitimate address. •
Daniel Kehrer can be reached at
editor@bizbest.com.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
