Fraud can happen to just about any business, but small businesses, in particular, are especially vulnerable. This is because small businesses don’t have the same kind of tools that larger companies have to enforce checks and balances for various departments. Without any preparatory measures in place, the damage to your small business could be devastating. This is why it’s important to partner with a corporate fraud law firm and establish precautionary measures to both prevent this from happening as well as to properly address this issue should it arise.

You can start by being knowledgeable about the most common fraud risks you might encounter as a small business. This will help you identify any warning signs so you can prepare yourself.

Cash Theft

This is the most common, but also the most blatant form of fraud you’ll likely come up against. Skimming small amounts of cash that hasn’t been reported is the most prevalent method that thieves employ. Other rampant techniques involve the release of money that you as the owner haven’t yet authorized (also known as register disbursement) and stealing money that has already been recorded (otherwise known as cash larceny).

False Invoicing

False invoicing occurs when an employee submits fraudulent, exaggerated, or duplicated invoices for goods or services that haven’t yet been rendered. The cash received is usually rerouted to a separate bank account that the employee owns. Employees either work individually or they may work with a third party to do this.

Insurance Fraud

If you offer worker’s compensation, some employees might take advantage of it for their own benefit. You might have employees falsely claiming that they received an injury while on the job just to receive their benefits and compensation. That doesn’t mean you should get rid of these entirely, it just means you need to be more stringent when it comes to providing a safe workplace for your employees and equipping them with the necessary safety equipment.

FraudPayroll Fraud

Payroll fraud involves employees stealing money from your company through the payroll system. There are several ways that this is executed:

  • Failure or refusal to pay back advances – When an employee requests for an advance on their pay but never pays it back.
  • Changing compensation rates – Employees may collude with someone in charge of payroll to alter their rates within the payroll system for their own benefit.
  • Falsifying work hours – This is the most stealthy way employees can get away with payroll fraud. All they need to do is accumulate a few more work hours here and there so that they can receive overtime pay. They may even go so far as to falsify their timesheets by having co-workers clock-in earlier for them, while they show up late or don’t show up at all.

Office Supply Scam

Employees may skim money off of your office supply budget by either requesting for office supplies that will never be purchased, placing orders for expensive yet unnecessary supplies, or pretending to be your regular supplier and asking you to reorder supplies.

Always keep these in mind, and make sure your employees are aware of these too. It pays to know the early warning signs of fraud so you can catch the perpetrators before they can do even more damage.




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