When it comes to managing your finances as a business owner, you should not go completely hands-off. This is because signs of fraud can be easily detected if you take the time to check your financial records. Fraudulent activities can affect your business causing you to lose a vast amount of money. There are three types of fraud you need to avoid as they can definitely hurt your business if they go unnoticed.
1. Over-ordering fraud
If you have a client who would routinely order and receive supplies from your company, there should be something you need to look into especially when you see that the client is already over-ordering supplies even when it is considered unnecessary. The client may return supplies in exchange for a gift card and take the remainder in cash. You will never know the amount of cash stolen especially if this fraud has been ongoing for one year. This type of fraud can be avoided if you are going to do the right thing from the start. You have to keep in mind that bad employees can ruin your company. If your employees are not well-compensated, they would feel as though it is just fair to steal or engage in a fraudulent activity.
2. Payroll Fraud
Have you ever noticed that your payroll account has not been reconciled to your time-keeping system? Payroll fraud is perhaps one of the most common types of fraud you need to prevent as it can cost you thousands or worse, millions of cash. For instance, you may see your company record where two employees and their manager were working massive hours. Of course, they are paid a ton of overtime for it. However, something is not right because the timesheets revealed the discrepancies. Before you realise you are a victim of payroll fraud, the money is already gone. Payroll fraud can happen to any business owner. When a figure is left unchecked, it can easily go unnoticed. You may check the records and still feel that you are keeping clean records, but as the fraudulent activities progress, you will come to realise that there are irregularities you need to investigate.
3. Double Check Fraud
This is the type of fraud that is hard to catch. Even if you are the type of business owner who looks at the financial statement frequently, you will never suspect any fraudulent transaction because the figures seem reasonable. However, the amount can add up very quickly because of writing double checks on a monthly basis. You can only detect this fraud if you decide to change your bookkeeper. The new person will notice that the bank account has not been properly reconciled in months. This is where multiple payments in the same month occur. Have an outsider check your books and reconciliations annually at random times so you can check some discrepancies.