Recognize 4 fraud scenarios in small and medium enterprises

Recognize 4 fraud scenarios in small and medium enterprises

Fraud knows no discrimination. Small to large businesses cannot be separated from exposure to fraud risk. However, small businesses are more vulnerable because they tend to be limited in terms of resources.

What factors make businesses generally vulnerable to fraud?

– Employees perform more than one job (multitask).

– Employees’ overconfidence with each other.

– There is no formal procedure, which means that all processes are not well documented.

– Employees lack awareness and knowledge of the fraud.

Here are five fraud scenarios for small to medium-sized businesses that business owners need to recognize.

1. The cash theft

Money theft can occur through skimming, larceny, and fraudulent disbursement (employees withdraw funds without the permission of the authorities). Generally, fraudsters do not steal in large amounts at once, but the action is done continuously for as long as it has not been detected. At the end of the day, the total amount of stolen money ultimately affects the company.

2. Payroll fraud

According to the report of the Nation on Occupational Fraud and Abuse in 2014, as much as 27% of salary fraud occurred in all businesses of various sizes and twice in small businesses. Small and medium business owners should have knowledge about the payroll system and enforce accountability to the bookkeepers in every monthly report. The complexity of the payroll system increases with the development of the business. Owners should consistently monitor and improve the payroll system on a regular basis.

3. Fraudulent invoices

This fraud method is increasingly popular among small and medium enterprises. Fraudsters make fake suppliers, then drain the money by issuing an invoice with a number of payments. Alternatively, the fraudsters take the money that should be used to pay the supplier. Therefore, business owners should really know who their suppliers are and oversee every invoice to be issued.

4. Online banking

Small businesses cannot be separated from the role of online banking. The popularity of this banking system increases the chances of funds being transferred to erroneous accounts. In addition, there is a risk of cybercrime. Business owners need to schedule regular meetings with teams related to the online payment system to monitor all the money transferred in and out.



Photo by Freepik

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