Financially savvy business owners try their very best to veer away from fraudulent transactions by implementing strict financial accounting policies in cash management. Some even go as far as utilizing modern cloud technology or hiring third-party financial services providers to check on their financial health. While these are all effective ways to prevent fraud, you still need to look into the different types of fraud in order to identify them. Here are the most common business financial fraud to look out for:
1. Payroll fraud
The most common fraud that businesses like yours could be a victim of is payroll fraud. This is the type of fraud that takes place when there is a lack of transparency in handling payroll records. The good news is, there is a way to work around payroll fraud. All you have to do is to reconcile your balance sheets with your payroll records. This way, you can have a way of checking if there is a possible discrepancy between the two.
2. Multiple payment fraud
As your business grows and your books become more complex, there comes the need to hire a bookkeeper to update your financial records. The problem with this is that entrusting this task to another person could be an avenue for fraud. When we say multiple payment fraud, this often refers to that instance when your bookkeeper or the person taking charge of your financial resources issues more than one check when there is just a single check requirement. The second check goes straight to the bookkeeper’s personal account.
This kind of fraud could be a little difficult to catch but if you have two persons working on your books and perhaps a third party financial services provider to audit your business finances, you won’t have any problem.
3. Affinity fraud
Finally, another type of fraud is one that is committed right under your nose by someone you trust. This person could be a relative or a very close friend. What usually happens is that business owners entrust all of the check payments and cash management tasks to that person. And that’s when the opportunity to commit fraud comes in.
To avoid such type of fraud, do not rely on the ties of family and friendship where your business finances are concerned. Rather, hire a professional financial services provider and instill a check-and-balance policy so you can always keep an eye on things. You could also run an internal financial audit to ensure the accuracy of your financial records.
Fraud is a very serious matter. If you don’t exert enough effort to avoid fraud, your business could lose a lot of money. In the long run, this could even lead to bankruptcy. You wouldn’t want that, would you?
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