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Would you have assumed that small businesses (less than 100 employees) are more at risk for internal fraud than their larger counterparts?
The Sydney Morning Herald‘s Adam Courtenay recently published a stunning article entitled Top five frauds small businesses face, and it’s well worth the read.
Here are the top 5 fraud risks for small business from Courtenay’s article:
1. False invoicing – most popular with fraudsters is the payment to fictitious suppliers or making payments to valid suppliers but diverting them to the fraudster’s own account.
2. Transferring money by EFT to one’s own account – is on the increase in both small and large businesses as online banking technology is adopted.
3. Cheque fraud – this mostly incorporates writing cheques to cash, or overwriting cheques in the fraudster’s favour. The risk is heightened if the same person who writes cheques also completes bank reconciliations, which in small companies can often be the case.
4. Payroll fraud – especially if there is a poorly segregated, or larger base of between 70 and 100 employees. It’s easier for payments to go undetected if not properly scrutinized by someone other than payroll but with requisite knowledge of the payroll. Overpaying overtime is also a problem, especially in collusion with an employee.
5. Skimming/theft of cash. This happens in businesses with less formal receipting processes (the ability to receive cash without issuing a receipt), or where the receiver can manipulate the debtors’ ledger and apply other receipts to the cash transaction that was misappropriated (also known as lapping).
Read the full article: Top five frauds small businesses face
How would you handle the situation if you caught a colleague engaging in any of the above fraudulent activities?