If you’re a business owner with less than 100 employees, it may surprise you that smaller-sized businesses are more vulnerable to fraudulent activities than larger companies. Why the discrepancy? Well, for one thing, small businesses typically have less checks and balances in place to monitor financial fraud, whether it be from an employee, vendor, or customer.
There are many ways to protect your small business from financial fraud, but to do so successfully, you’ll want to avoid these common mistakes:
One Employee Manages Everything: Let’s say you have an employee who manages multiple financial management tasks, such as writing checks, invoicing and processing, or performing other monetary duties. Although you may trust this individual, having one person carry this much financial management responsibility can put your business at risk of fraud or even possible embezzlement. It’s best practice to separate these tasks out to more than one individual and to also personally review account statements on a monthly basis to ensure everything checks out.
Use of Company Card: When you have a smaller-sized company, you may have a company card or business account that other employees use for travel expenses, supplies, and other business expenditures. Although this helps streamline your operations, it also leaves you vulnerable to lost or stolen account information. Instead of passing around one card in your name, it’s better to add certain employees as authorized users to the account. Just remember to implement spending limits and account alerts to help you better monitor spending activity.
Lack of Employee Education: As part of your company’s onboarding process, include a training session on how to identify financial fraud. This way new employees are better equipped to recognize suspicious emails and attachments or calls from scammers posing as vendors. You may also consider setting up a fraud hotline that allows employees to report fraud activity, whether it be from a customer or a fellow colleague.
Not Having a Financial Planning Advisor: Aside from helping you plan your finances and protect your assets, experienced financial advisors also help you spot and prevent financial fraud from harming the future of your business. Of course, it’s equally important that when consulting a financial planning firm you ask questions, review credentials, and understand how they plan to help you achieve your goals before you hire them.
At Focus Financial, you can trust our team of independent financial advisors to provide the guidance, expertise, and professional financial management strategies to accomplish the needs of your small business and employees. Contact us today to learn more about our services that will help protect your small business from financial fraud and give you back your peace of mind.