If you run or support a small business, you may think there is little potential for fraud, so there’s no need to worry about it. You probably think you have few assets to be taken, you know (and trust) the employees, and believe an overall handle on things is in place.
The reality is… you’re oh so wrong.
So, even with all these stats, you are probably thinking this may just be a lot of FUD and really doesn’t apply to your case. Even if I tell you a small business is 1.45 times more likely to be the victim of fraud than an enterprise company with 10K employees? Your disbelief may partially be due to a distinct lack of anyone yelling “FRAUD!” But allow me to throw one more stat at those of you who don’t believe it’s happened at your business:
'The average time to detection of fraud is 18 months'
So, while you’re thinking it’s not happening, you really won’t know if that’s true, roughly, for another year and a half.
What makes the small business so susceptible to fraud?
SMALL BUSINESS AND FRAUD: A RECIPE FOR DISASTER
It’s actually quite simple, and can come down to two basic reasons:
1. Individuals have Too Much Power
Small businesses tend to have a small number of individuals – if not a single individual – in charge of managing payroll, checks, assets, etc. This person is still human and may fit into Donald Cressey’s Fraud Triangle, which defines the three criteria that, if met, will usually result in fraud:
2. Companies have Little or No Controls
If there’s only one person managing company assets, there is likely no process in place to double-check the work being performed by the individual in power.
Put these two reasons together and you begin to see it’s really quite easy for a small business to become the victim of fraud. I would guess you know more than one company that is just small enough to fit the picture painted above.
WHAT'S A SMALL BUSINESS TO DO?
Many controls enterprises uses are too costly and, therefore, not feasible for a small business, but there are some steps you can take to minimize fraud.
The technical steps:
The non-technical steps:
DON'T WORRY; BE VIGILANT
While fraud is a reality for the small business, it simply takes some simple actions to put safeguards in place that protect against Fraud. While you’re never guaranteed to not be a victim of fraud, you can minimize your risk and exposure to it.