Fraud Prevention for Small Businesses

Tips are the most successful fraud prevention technique that is also very simple for a small business to put into place.  According to the 2010 Report to the Nations, “Tips were by far the most common detection method in our study, catching nearly three times as many frauds as any other form of detection.”  This report indicated that tips from employees, vendors, customers, competitors and acquaintances were responsible for 40% of the initial detection of occupational frauds.  “Management review” and “internal audit” were a distant second and third, 15% and 14% respectively, on the list of fraud detection methods which were responsible for the detection of fraud.
In order to take advantage of this effective fraud prevention measure, a business should implement an “Anonymous Reporting System.”  Such systems enable employees and others to anonymously report fraud or misconduct by phone or through a web-based portal.  Employees can report fraud without fear of reprisal or negative treatment by superiors or peers.  The “report” indicated that “organizations that had fraud hotlines suffered much smaller fraud losses than organizations without hotlines; those organizations also tended to detect frauds seven months earlier than their counterparts.”
If you have additional questions about fraud prevention techniques, please contact our office.
Billy Upchurch, CPA/ABV/CFF, CFE, CVA