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How to prevent fraud in your business? Information & Tips

The Association of Certified Fraud Examiners (ACFE), the world’s largest anti-fraud organization, reports that small and mid-sized businesses are the most frequent victims of fraud. [Read the report here]

This type of fraud can be particularly damaging to smaller businesses, as they can less easily absorb the financial losses.

Here are some key takeaways from the ACFE’s research:

  • Small businesses with fewer than 100 employees account for over a quarter of all fraud cases, even though they represent only about half of all businesses.
  • The median loss per fraud incident for small and mid-sized businesses is $190,000, which is significantly higher than the median loss for large businesses.
  • The most common types of fraud in small and mid-sized businesses are asset misappropriation, financial statement fraud, and corruption.

Frauds can be divided into three categories:

  • theft
  • financial statement fraud
  • asset misuse

And the most common fraud is through theft!

  • stealing cash
  • claiming fake expenses
  • taking property

Why are small and mid-sized businesses more vulnerable to fraud?

There are a number of factors that make small and mid-sized businesses more vulnerable to fraud, including:

  • Limited resources. Smaller businesses may not have the resources to invest in robust fraud prevention and detection measures.
  • Lack of segregation of duties. In smaller businesses, employees may be responsible for multiple tasks, which can create opportunities for fraud.
  • Close relationships. Employees in smaller businesses may have closer relationships with each other and with management, which can make it more difficult to detect fraud.

What can small and mid-sized businesses do to protect themselves from fraud?

There are a number of steps that small and mid-sized businesses can take to protect themselves from fraud, including:

  • Implement strong internal controls. This includes segregating duties, conducting regular audits, and using fraud detection software.
  • Educate employees about fraud. Employees should be aware of the different types of fraud and how to spot them.
  • Create a culture of ethics and compliance. This means creating an environment where employees feel comfortable reporting suspected fraud.

Need “expert help” to implement fraud prevention mechanisms?

Fraud prevention starts with a conversation, but many small business owners feel awkward introducing these measures to their trusted employees. You may worry that it will make you seem untrustworthy or suspicious.

If you are a small business owner and you don’t have the resources or expertise to prevent fraud, we can help overcome this barrier by playing the “bad cop.” We can introduce the fraud prevention measures on your behalf, and explain to employees that it’s all our idea. This can help to take the pressure off of you and make it easier for you to implement these important measures.

Contact Bhrikuti Advisors at contact@bhrikutiadvisors.com or send a whatsapp message or give us a call at +9779851352719.