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Fraud Is No Small Matter for Small Business
By siliconindia
Fremont: "There are some frauds so well conducted that it would be stupidity not to be deceived by them," said Charles Caleb Colton. But such frauds had brought to a loss of an estimated amount of $2.9 trillion globally, or about five percent of annual revenue for a typical company, to frauds committed by their employees, states a report by the Association of Certified Fraud Examiners or ACFE in 2010.
Few small businesses close its door, but never come to know that they were defrauded, that the problem was not a economy slowdown, but was fraud by employees. In general, identifying fraud can be very difficult due in part to the fact that the swindler usually know and understand the system. In a small business, small people usually wear a number of hats and so the chances to catch hold such con becomes difficult. It is thus important not only to watch the higher levels in the business but also the bottom lines where more of workers' compensation fraud costs a higher degree of alarm to the small business. This fraud occurs when an employee lies knowingly to collect benefit from the employer, thus claiming some injuries to be work related even though it is not. Proper control requires the segregation of duties but small businesses have limited resources thus are often cost prohibitive.
Other factors responsible for fraud in the small businesses are incentive, opportunity and rationalization. Too much of trust, weak internal controls, no supervision, and no independent outside audit also leads to increased fraud in small businesses. These human factors are responsible for taking the company to new height, but the management should remember that they are the biggest risk factors to any organization.
The fraud caused by these human resources can be in the form of theft of goods, stealing off and passing the confidential information to the competitors for a reward, over-charging the expenses and defusing the prevailing work force to call for strike. These frauds can lead the business to heavy infusion of expenses that many small businesses might not be able to handle for a long period of time, thus resulting in the closure of business.
Detection of such frauds and cons are good but prevention should be the goal. A robust recruitment channel should be initiated to eliminate such fraudulent people from being hired. A proper reference check should be conducted to lessen the chances of going with the lies dumped in the CVs. Try to avoid the use of personal storage devices such as USB sticks, at work. This will help you keep a track of what they do and where they violate the organization's ethics. Remember that ignorance is bliss, make it a rule for the new employees to sign acceptable use policies for what is what is not allowed in the organization. Also keep updating the new and the existing employees about any changes in the policies and rules.
Keep it a must to let the employees get an access to information only to the limit they need for their work. Segregate the duties to limit one from more than giving responsibility for more than one related function. Keep an eye on the unusual traffic patterns in the organization as such people are more involved in the transformation of information between unauthorized locations.
It is a fact that fraud can never be eliminated cent percent, but one can try his level best to lower it to the extent he can. These small but concrete steps might serve a purpose for the organization to stay alive for a longer period to time with good health.