What the Fraud??

Week 7
(question 12)

Anybody that pays the slightest amount of attention to the news knows that fraud can really impact a business. Many large companies on Wall Street have gone belly up due to fraud in the past decade. But fraud is far more common than one may think in the business world. And fraud can do paticular damage to a small business, in most cases far more than to a larger company. The reason is simple. Fraud is an ugly word, its an ugly action, and when fraud happens in a small business, if the business is lucky enough to survive, its image will be tarnished. Many small business are family owned and operated, and there is sense of trust there. But with trust comes betrayel, and most fraudelant activity comes from within the business itself. Ordering an extra case of wine for the restaurant, only to take it home upon delivery doesn't seem like much, but its stealing. Writing false billing statements to earn a little extra money on the side may seem harmless enough to your cousin who manages your automotive garage, but if a customer finds out, and goes public, your reputation is ruined. Really, one lost law suit could bankrupt a small business if they didn't have adequate insurance. There are plenty of examples of how fraud can hurt a business, and even cause the failure of a business. And most business minded people probably realize that fraud is usually more damaging to a small business than to a larger company.
So how to prevent fraud? Be sure and have a rigid hiring system in place. Do adequate interviews. Background checks are not a bad idea. If able, obtain a copy of the potential employees credit score. This will let you know if that person stays on top of their budget, a good sign. And don't settle for first person that comes along, be patient and find a good solid person. Be sure and do inventory often, and have staff meetings often. Having closed circuit tv monitors will deter would be frauders. Do internal audits once a year, and perhaps hire an outside firm to perform an audit once a year. If you deal with checks, requiring two signatures for endorsement is a way of limiting fraud. Having a good accountant helps to detect signs of fraud, and could perhaps nip it in the bud.

Don't be naive, fraud happens!