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How Businesses Can Prevent Fraud

How Businesses Can Prevent Fraud During COVID-19

June 5th, 2020

Fraud is a severe issue that could take down a company, no matter its size. According to research by the Association of Certified Fraud Examiners (ACFE), businesses lose an estimated 5% of their annual revenue.

What is business fraud?

Business fraud happens when a person or a company commits dishonest and illegal acts that result in a financial gain for that person or organization. Business fraud can often be covered and appear to be a legitimate business interaction.

Because fraud is such a grand problem – so much so that it could even lead to the critical failure of an otherwise healthy business – it’s important to combat it vigorously. Research published in Harvard Business Review (HBR) suggests that employees are in the best position to fight fraud.

What are the different types of business fraud?

Here are five major types of business fraud that could negatively affect your business:

Identity theft: A fraudster could steal the identity of your business and access your credit. Fraudsters may obtain access to your federal tax ID or financial statements. They could take this information directly from your computer.

Payroll fraud: This may be more common with a smaller business, but it can happen at companies of all sizes. Workers may ask for paycheck advances and not pay them back. They may also lie about hours they worked or have co-workers clock in and out for them. Utilizing a payroll service that lets you approve everyone’s time before they are paid may help to prevent payroll fraud.

Fake money: Your business may receive phony money. There is more counterfeit money in circulation than you probably realize. It would help if you learned how to recognize fake money so you can refuse to accept it.

Returns: If your business deals with consumer goods, you may have customers buy items, use them, and return them even though there is nothing wrong with them. Requiring a receipt and having strict return policies may help to limit return fraud.

Workers’ compensation: A business owner is required by law to purchase worker’s compensation. This insurance pays your employees if they get injured while at work. Companies should stay on top of safety and what happens in your place of employment to help prevent this type of fraud. You should also ensure that if an employee states they were hurt at work, the injury actually happened there.

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