Types of Fraud That Can Ruin Your Business
Are you an entrepreneur? If so, do you know the biggest issue you could face as you run your business? If you answered fraud, you would be correct. Many business owners worry about attaining customers and making money, but the truth is that fraud should also be on your mind.
Fraud is a serious issue, affecting half of all entrepreneurs. The average fraud act costs $114,000. Making matters worse is the fact that in most cases, a trusted employee is the one committing the fraud. Fraud can be minor, costing a few hundreds or thousands of dollars. In some severe cases, though, the fraud accounts for millions of dollars.
There are four main types of fraud to watch out for. If you own a business, keep an eye out for these fraudulent activities that can cost your business thousands of dollars.
Payroll Fraud
It is important for business owners to ensure that their timekeeping systems match their payroll reports. Some employees will try to claim overtime on their time sheets. If an employee engages in this practice on a weekly basis, this can add up to thousands of extra dollars every year. If a company spends a lot of money on payroll as it is, they may not notice this until it’s too late. To prevent this, every company should reconcile payroll records and balance sheets on a monthly basis.
Over-Ordering Fraud
This is often caused by disgruntled employees who find it fair to steal from their employers. This is done by over-ordering office supplies and then returning them for gift cards. The supply orderer buys a small item and gets the rest of the gift card in cash. This may not seem like a lot, but if done regularly, a company can lose tens of thousands of dollars.
Double Check Fraud
This occurs when two checks are written at the same time. For example, when a bookkeeper pays the Acme Materials Company, they write another check—to themselves. They may write a check for an amount a bit lower than the other check so it doesn’t seem so suspicious. When business owners check the expenses, they may not immediately notice two checks written at the same time. However, this fraud can quickly add up, especially if done multiple times a month. This is why business owners should consider having multiple people reconciling the books. It may also be worthwhile to have someone outside the company do a review on a quarterly basis.
Friendship Fraud
Some business owners feel the need to give jobs to friends and family members who are unqualified. This is a bad idea. Many soon realize that they are being taken advantage of. They learn they cannot trust the people they have known for many years, especially when money is involved. The key takeaway here is to hire based on talent and performance, not sympathy
Seek Legal Help
Businesses need to hire based on performance. Integrity and accountability should be the main factors you seek when hiring employees to avoid fraud and other issues involving immorality.
Fort Lauderdale business torts lawyer Edward J. Jennings, P.A. can help you deal with fraud and other issues that can impact your business. Schedule a consultation today. Fill out the online form or call our office at 954-764-4330.
Resource:
entrepreneur.com/article/227689
https://www.ejj-law.com/loreal-must-pay-91-million-for-stealing-trade-secrets/
