Types Of Business Fraud

Fraud is a potentially devastating reality for businesses that many business owners would simply prefer not to think about it. And who can blame them? It seems like such a cruel twist of fate for a business that has overcome long odds to achieve success and stability within their market only to fall victim to fraud at the hands of a trusted employee or family member.

While many are stable enough to withstand an occurrence of fraud with their core business intact, many others — especially new and small businesses — find that one major fraud case is enough to permanently damage their operations and even their very existence.

It is always tough to plan for the worst case scenario, but that is just what businesses of all sizes have to do when it comes to preparing for the possibility of fraud.

Victims of fraud often feel that they were struck seemingly at random with no way to adequately prepare or respond. Most of the time there are steps a business can take to prevent fraud from happening in the first place.

With fraud, as with other negative circumstances, an ounce of prevention is worth a pound of cure, and fraud prevention begins with learning as much as possible. Eventually a business may want to contact a Dublin fraud risk assessment professional; for now, it may help to review this list of possible types of fraud in order to start thinking about possible protective mechanisms.

Payroll Fraud

Payroll fraud is easier to fall victim to than it seems. Many business owners think that only a payroll administrator or human resources professional has the access necessary to commit fraudulent payroll activity, but in many cases it can be carried out by many different employees. If your business relies on employees to fill out their own timecards, payroll fraud is a real possibility. Especially in cases where travel costs are reimbursed through information on a timecard or in which overtime is compensated at a much higher rate than regular hours.

If your business has a lot of employees, it will be difficult for anyone to notice an individual employee committing payroll fraud. In order to prevent the occurrence of this type of fraud, increase the frequency with which you assess timecards. You can check their totals on a weekly, monthly or quarterly basis, and may also choose to implement a regimented system of randomly checking individual timecards.

Fraud Committed By Friends & Associates

Most business owners rigorously vet employees they hire to help run their business, especially their accounting staff. The exception to this can be when a friend or associate is hired for personal reasons. Any fraud committed by a personal friend or acquaintance can be doubly difficult to catch because the owner doesn’t want to believe the individual is capable of abusing the relationship in such a way.

Fraudulent Checks

This type of fraud is generally committed by a business’s bookkeeper. While most business owners feel that they would instinctively notice any fraudulent checks being written on behalf of their company, the truth is that it is much more difficult to catch. Many cases of this type of fraud involve a bookkeeper simply writing two checks for the same amount when only one is called for. Even the most meticulous of us are likely to skip over such a deceptive trick that our brains just aren’t wired to notice. Over time, fraudulent checks can add up to major financial problems.

Hiring a third party to routinely go over a business’s accounting can help greatly with fraud prevention.