What are the common types of fraud in business?
It is common to target small businesses because they are aware of the lack of security in the industry. Not all small businesses can afford to set systems to detect scammers straightaway when they try to do something. Therefore, they are encouraged to commit fraud.
Will fraud bring your company down?
Usually, a small business runs with a tiny profit and a tight cash flow, especially at the start, or if they have set it up, they try to establish & grow the business. Therefore, the owners of small businesses are busy making things cheerfully work for them; bear in mind the slightest break can cause them a big problem will find it difficult to fix it.
I will tell you my experience; as you know, I am an online course creator, eBook writer, and accounting worker. Therefore, I have all the critical writings on my computer, so some people must have followed them and they hacked my computer. They started asking me for money while accessing my laptop, but I completely denied it. Do you know what they did; they deleted most of my valuable content. However, fortunately, they failed as I had protected it beforehand, so able to recover it. However, it was frustrating and challenging work for me.
If I have not protected it, I will be on the verge of leaving my small business for good. Therefore, fraud is dangerous. It can bring the company down. As such, you need a solid system to detect potential fraud cases and prevent fraud whenever possible.
The most common type of business fraud
Fraud covers a massive range of unethical activities in a company. Business fraud means one or more people committing illegal activities for their financial gain in business.
- An individual can make a personal claim from the company. For example, they can get higher travel expenses from the company.
- Some employees can steal small assets from the company and sell them outside.
- Some people create fake invoices, transfer money from the company, and pay those invoices.
- Daily thieving of small amounts of money can go on for a long time without noticing it. These types of fraud can occur when no proper finance system is in place. There is no control over the expenses or the income, and it is not appropriately balanced.
- Payroll fraud: Some casual employees can produce incorrect time sheets showing more hours worked to claim more money. They can be fraudulent with payroll in many ways. Therefore, proper internal control of accounting and payroll systems is crucial for businesses not to lose money.
Since fraud is so prevalent among businesses of all sizes, it is impossible to list all of the potential fraud situations that might occur. The above list gives you an idea of how someone might take advantage of your company. Your responsibility is to be proactive in preventing fraud, helping reduce the likelihood of these issues happening to you.