Small businesses in the United States will lose, on average, nearly 5% of their gross annual revenue to fraud. Business fraud can take much-needed income away from your business and leave you stressed out. Small businesses are much more likely to be the victims of business fraud compared to larger organizations.
There are many types of business
fraud that you should be on the lookout for if you're a business owner. When it
comes to protecting your business from fraud, there are things you can do to
prevent each type of fraud.
Let's take a look at the types of
business fraud and then how to prevent them.
Types
of Business Fraud
Each of the different types of
business fraud are perpetrated by different people and for a variety of
reasons. The list below is not exhaustive but covers the most common types of
fraud.
Payroll
Fraud
Payroll fraud is when somebody takes
advantage of your company's payroll systems to steal money. It is most often
done by making the theft look like a legitimate payment to somebody for their
labor.
It can be committed by anyone inside
or outside of the company, but it's most easily perpetrated by someone who has
ready access to your payroll system.
Financial
Statement Fraud
Financial statement fraud is a tad
more complex. Every year, your business will have to report its earnings and
expenditure.
Financial statement fraud often
involves manipulating these figures to misrepresent the amount of income or expenditure.
The common phrase 'cooking the books' refers to this kind of business
fraud.
Companies will often do this to get
access to loans or make their debts seem substantially better than they
actually are.
Tax
Fraud
Your company's financial statement is
also used to calculate how much tax the business owes. The more revenue a
business has, the higher its tax bill will be.
Tax fraud is usually committed in an
attempt to drive down the company tax bill and avoid paying higher rates.
Corruption
Finally, there is corruption.
Corruption is somewhat of a catch-all phrase that encompasses any illicit
financial activity that is typically associated with organized crime.
This includes things like money
laundering, accepting bribes, or conducting business dealings with known
criminals.
How
to Prevent Business Fraud
Business fraud can be very stressful
for a business owner to deal with, especially if it gets to the point of having
to go through any business lawsuits.
The best thing you can do is stay
alert about who has access to your financial systems and make sure that your
accounting team can be trusted. It's also worth investing in some advanced
cyber security measures.
You can also get yourself some small
business insurance. Companies like combinsurance.ca can handle any business claims that you might have in
relation to fraud.
There
is Always a Solution to Business Fraud
Hopefully, you'll never have to use
the advice in this article, but the different types of business fraud listed
above are committed every year against companies up and down the country, and
it helps to be prepared. Just remember that there is always something you can
do to recover any money lost to business fraud.
If you're looking for more great business advice, then you're in the right place. Stick around on our website and check out some more of our great content today.
