Business Fraud: Understanding The Signs And How You Can Avoid It

Business fraud is a worldwide problem that has been evident for years, more so with the increase in conducting business online.

Amidst tough economic conditions, most SMEs tend to focus on growth and survival, as opposed to risk management and due diligence. This approach can leave these companies vulnerable to fraud, especially if they are unaware of the potential signs.

With any indication of fraud, time is critical. In these instances, it’s recommended that you contact a team of litigation lawyers with collective experience in fraud detection and asset recovery claims. This way, you can minimise the damage caused to your business and resolve issues quickly.

Whilst there isn’t a single solution to prevent fraud, we’ve provided some information to help you identify the most common issues so that you can take action to protect your company and your employees.

Set up a fraud management program

The first step to fraud detection is creating a program that clearly states your policies and procedures. Definition is key here and should remain consistent to avoid confusion.

All successful fraud management programs consist of three phases: fraud prevention, detection, and investigation. It’s important to cover all three in order to assist with avoidance and recovery.

All members of staff should be made aware of the program and provided with the relevant training. This can be done in person or through videos online but you should aim to provide scenarios or questions to test whether employees have understood the content.

You can also set up an anonymous reporting system so employees can report any emails or documents they deem unsafe. Random detection examinations and tests are a great way of seeing if your staff is able to identify these situations and use the tools correctly.

Build trust with your partners and employees

Your organisation may consist of a few employees or a few thousand employees; either way, it’s vital that you trust each member of staff and observe those who have significant involvement in the company.

A formal hiring procedure is a necessity for preventing fraud. Conducting thorough background checks of past jobs and employment history will help to identify whether a fraudster will be introduced to the company.

Similarly, you must also be sure that you are working with trustworthy suppliers and partners. Always carry out audits of new suppliers and ensure you have some form of collateral or defence. This can be anything from a dependable reference to a physical address.

Implement extensive internal controls

Executing a set of internal controls is one of the simplest ways to make fraud more difficult and easier to detect. This generally refers to processes that safeguard assets and financial integrity.

A great way of protecting your computer systems from hackers and detecting breaches early on is by installing a robust firewall and antivirus software. Set up passwords that are difficult to crack and have these changed every 2-3 months. For added security, employ two-factor authentication when accessing company resources.

Consider backing up all of your important documents and files offline every week or so – that way you’ll be able to access the files should anything happen to the system. Limit who is able to access important files, including financial account data and inventory. Also, reducing the number of people able to access company data is a key ingredient for preventing fraud.