6 Business Tips to Prevent Fraud

No matter your business size, fraud is a serious problem that can cause financial loss or even threaten your company’s survival in some extreme cases. However, small and medium-sized businesses are usually hit harder when management or employees engage in fraudulent activities. Employees are frequently the main culprits when businesses face fraud, but also some customers can take part in such activities.

Business fraud generally falls into one of three main categories: asset misuse, financial statement fraud, or theft. Here are a few tips to help you prevent fraud in your business.



It is crucial to employ the right people for your business. Doing a background check is essential in every enterprise, regardless of the size. It helps to know more about the applicant, and you get information about their past. Avoiding a background check can lead to employing a hacker or abuser. After hiring staff, you should know about their financial position, informing you about monetary or fiscal irresponsibility. This mostly applies to those who will work in the accounts and finance department. You can also run a social media background check to learn more about the employee.



Some goods that clients purchase can be faulty; therefore, they will return them. But some clients take advantage and return a non-faulty product, claiming money for it. As a business, you should ensure that there is a no cash refund policy. If a client returns a product, issue them with a credit note that allows them to purchase another product of the same price within a certain amount of time. Ask for a receipt to prove that the purchase was from your business. This way, customers will not return products without a valid reason.



It is essential to be respectful and treat all employees the same, regardless of their position. Issue an employee handbook that explains necessary policies and procedures, such as workplace safety and anti-discrimination policies. If an employee reports a case, look into it thoroughly and do not be biased. It is essential not to favor your long-term employees if a complaint is raised against them only because you feel they can’t do anything wrong. Some employees tend to take advantage of the trust built. Deal with them individually, and terminate them if necessary.



In most small enterprises, the cashier usually handles the accounts of the business. Such businesses are more vulnerable to fraud. A cashier who is also an accountant can easily manipulate the financial statements, especially when committing fraud. You will not notice it since there is trust between you two. Having another employee do the accounting work will detect any discrepancies.

You can even let your employees take annual leave and monitor how the business performs without them. It will expose fraud if it is taking place. Employ additional staff for different departments. It is best to rotate work duties for employees in a department to prevent fraud. Some employees who are in a bad financial situation are more likely to commit fraud. Other issues include working conditions and workplace safety.



It is essential for every business, regardless of size, to maintain internal controls. Not all staff should have access to the business’s financial and inventory statements – only accountants, top-level management, and internal auditors. By restricting the other employees, you can prevent fraud.

Money reimbursement, issuing of checks, or any other accounting functions should be delegated to one employee to avoid fraud. Issuing of all checks should pass through you so that you are aware of transactions taking place. Recording all transactions through an online system will inform you of any discrepancies and reduce fraud. As a business owner, you should audit books regularly via an external auditor, especially in product returns, cash, refunds, and accounting functions.



It is crucial to protect credit card information as it is the most targeted by cybercriminals. Outsourcing to managed IT services can help prevent cyberattacks, fraud, hacking, and cybercrimes. In case of an attack, the IT company will quickly detect the culprit using modern technology. Moreover, only give the most trusted employees the ability to pay expenses with a company credit card. It is important to separate personal and business accounts to prevent fraud and make it easier to keep track of expenses individually.



These are some of the tips you should follow to prevent fraud. Take strict actions against an employee who commits fraud, and if necessary, involve an attorney. Also, don’t forget to make workplace safety an essential part of your company’s culture.

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Written by Cristi Waterson


April 23, 2021

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