• BDW

8 Ways to Protect Your Business From Fraud

Updated: Jul 31, 2019

Fraud is scary and expensive. According to the Association of Certified Fraud Examiner’s 2018 report, “private companies and small businesses rank highest in occupational fraud frequency.” The AACFC says U.S. businesses will lose an average of 5% of their gross revenues to fraud and that private companies, including small businesses, had a median loss of $164,000 in 2018. The biggest reason for all this loss? Lack of internal controls. What can you do to protect yourself from all this theft? Here are a few steps you can start taking right now to prevent fraudulent activity in your business.

1. Check Out Your Employees

It starts with the hiring process. Make sure to verify the employment records of all employees, you could even run background checks. This is especially important for any potential employees who will have access to money or your bookkeeping procedures.


2. Have a Data Back-up System

Another way to prevent fraud is to have a data back-up system and to use it regularly. It should be kept off-site and the owner should have personal possession of it. This is great to keep employees honest and also as a record to compare to if you suspect something is wrong.


3. Separation of Duties

The number one thing you can do to protect your business is to have a separation of duties. One person should not have enough access or authority to be able to take money and also cover it up. For example, the person who prepares the checks and bills, should not be authorized to sign them; the person who accepts payments should not have the ability to write- off money on a patient’s account; and the person who makes the bank deposits should not be the same person receiving and recording payments.


One way to implement a separation of duties, even in a small office is to outsource your bookkeeping or payroll services. Another option is to take advantage of apps or services that automate your bills or expense reimbursement. Programs like bill.com or Expensify can save you time and money and help protect you from fraud.


4. Use the Built-In Protections

Most bookkeeping software and other software specific for your industry will have built-in protections. But they only work if you turn them on and take the time to set them up. This can be time-consuming in the beginning but could save you thousands.


5. Separate Passwords

Don’t just have one password for everyone in the office. Give each employee a unique login or password and make sure that employees only have access to things they need for their job. Be careful about who has full administrator rights. This also goes for burglar alarms. If each person has their own password, you can monitor if anyone is visiting the office at odd hours and who it is.


6. Keep Records

Require receipts for expenses and other purchases. You can even scan in and save receipts and other records directly in your bookkeeping software and link them to the transactions. There are also apps or programs you can get to help manage this.


7. Check the Records

Most fraud goes undetected for 16 months. Stay on top of it by routinely checking your records. Match your day sheet or daily record to the bank deposits and track your expenses on the bank statement. Scan the payroll and make sure it matches the payroll reports. Doing this regularly will make it harder for someone to hide things.


8. Know Your Employees

We don’t want to think someone we know would ever be capable of stealing from us, but we shouldn’t be too trusting either. Watch for warning signs in your employees. Behaviors such as addictions or compulsions, blanking their screen when someone walks by, someone who wants to be in control of everything or someone who intently objects to changes in banking, payroll, accounting or involving outside consultants could indicate something isn’t right.


If you think you may be a victim of fraud, it is important to get professional help to investigate. Making inquiries on your own could result in ruining relationships with employees or in the destruction of evidence.

There is no way to eliminate your risk of fraud, but with some vigilance and a few new

practices, you can minimize your risk and your damages.



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