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3 Fraud Prevention Techniques Every Business Should Employ

Many businesses are losing money because of fraudulent activities. While simply looking at the reports will not easily allow you to spot any fraud, prevention and detection are still essential to reducing loss. There are various types of fraud that can take place in the workplace. They are broken down into three categories: financial statement fraud, asset misappropriation and corruption. Financial statement fraud refers to schemes which involve intentionally omitting or misstating information in the financial reports. It is either the bookkeeper hides liabilities or inflates assets. Asset misappropriation is the type of scheme in which an employee exploits the company's resources. Corruption refers to extortion, bribery and even conflict of interest. In corruption, employees use their influence when doing business transactions only they can benefit from.

1.Inconsistent Financial Report

If you see omissions or misstatement of financial information, this is a sign that something is wrong with your financial statement. While mistakes can be committed every once in a while, committing errors deliberately becomes a fraudulent activity as it is done on purpose. It is important that you review your financial statement regularly so you will know if your bookkeeper is tweaking any essential information on your report.

2. Incorrect Bookkeeping Procedures

Correct payroll guidelines and procedures must be observed. If they are resistant to change and insist on keeping old procedures, the financial and payroll records from previous years must be investigated for any incorrect or misleading information.

3. Misfiled Paperwork

It can be frustrating when you cannot find any essential business records such as deposit slips, payroll records and supplier correspondence. These records should be kept as they are going to be necessary for keeping track of your financial transactions. If they mysteriously disappear, you know that your bookkeeping has got some explaining to do. 

Fraud Prevention

It is important for every business owner to create a reimbursement and expenses policy. For instance, billing your credit cards directly to your company must not avoided. bill them to the employee instead. It is also important to prepare an expense report for each employee and all receipts must be turned in for any business-related transactions. You should also set a daily limit as this will help you control the amount of cash employees spend. This policy imposes stricter rules that will enable you to monitor expenses effectively.  

Aside from the reimbursement and expense policy, you should also review financial records. These records should be complete, if any of the records are missing, you should ask your bookkeeper or the person in charge for explanation. Checks and balances must also be strictly implemented.                                  

Tamara Deterding

Written by : Tamara Deterding

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