- Fraud prevention is essential for business success, as nearly a third of businesses suffer from fraud yearly.
- Fraudulent business activities can be divided into asset misappropriation, corruption, and financial statement fraud.
- Implementing strong internal controls, periodic reviews, regular employee training, and promoting an open culture are essential to preventing fraud.
- Monitoring and surveillance technology and physical security measures should also be implemented to deter fraudsters.
- Security training and an incident response plan should also be put in place.
- 7 Figures Funding can help new business owners secure the capital they need by offering personalized support through the funding process.
The experience of starting a new business can be both exhilarating and nerve-wracking. While you’ll be dreaming up ways to get ahead of the competition, you must protect your company against potential fraudsters and scammers looking to exploit vulnerable businesses like yours.
That’s why it’s essential for all new business owners in Brooklyn – or any other area – to ensure they have strong business fraud protection measures in place from day one so that their start-ups can continue to grow without fear of financial loss due to malicious actors.
This blog post by 7 Figures Funding will explore eight ways to implement adequate fraud protection for your start-up business. From identity verification systems through social media monitoring tools and employee security awareness training programs, let’s review all the steps you should take before launching your new business!
Fraud Prevention Is a Necessity Now
Year after year, nearly a third of businesses are estimated to suffer from fraud. Internal problems such as embezzlement and misallocation of resources can leave your company open to fraudulent financial reporting, which could draw the attention of IRS officials and lead to revenue loss.
Adopting fraud prevention and detection measures is indispensable to reducing financial losses. Every organization should have a plan, as preventing fraudulent activity is much more effective than attempting to recover your funds after fraud.
Forensic accounting services can help prevent these situations and uncover any financial crimes occurring within the business.
Through forensic analysis, it’s possible to trace where stolen money has gone, allowing for its successful recovery by law enforcement or other parties involved.
Types of Business Fraud
Business fraud activities come in various forms and can be classified into three categories: asset misappropriation, corruption, and financial statement fraud.
- The most common among them is asset misappropriation; it accounts for 90% of the fraudulent cases studied – and involves an employee exploiting or stealing their organization’s resources. It could include falsifying expense reimbursement claims, taking non-cash assets from the firm without authorization, and pocketing cash before (or after) its recording.
- Although financial statement fraud only accounted for less than five percent of all cases, it caused the most loss. Unscrupulous parties perpetrate this scheme by deliberately manipulating information reported on their company’s financial statements; examples include creating false revenues, concealing liabilities, or exaggerating assets.
- Corruption was considerably less common among the cases and accounted for less than one-third. It generally happens when those within a company utilize their power to take advantage of business dealings to further their interests without considering the employer’s best interest – bribery, extortion, and conflict of interests are all examples that fit this definition.
Critical Factors in Preventing Business Fraud:
Fraud prevention is instrumental for any size business. Yet, the ACFE 2014 Report demonstrated that fraud cases usually go undetected for 18 months. Your company risks suffering immense losses from fraudulent activities if you do not take appropriate steps to deter them. Implementing different procedures and controls can protect your organization and decrease these incidents.
Strong Internal Controls:
A sound internal control system is a critical factor in preventing business fraud. It includes establishing proper separation of duties, implementing appropriate authorizations for transactions, and granting access to assets only on a “need-to-know” basis.
Periodic reviews are necessary for the company’s financial records and reports by an independent reviewer or auditor to determine if any irregularities exist. This helps detect inconsistencies or possible fraudulent activities not previously discovered.
Regular Employee Training:
Employees should be regularly trained on ethical conduct guidelines, policies, and procedures regarding fraud prevention and detection and the consequences of violating them.
Promoting An Open Culture:
The company should promote an open culture where employees can report suspicious activities or fraud without fear of retribution. This helps create a culture of trust and accountability that discourages fraudulent activities from happening.
Monitoring And Surveillance:
Technology can be utilized to monitor employee activities, track financial data entries, and analyze trends to detect any discrepancies or anomalies before they snowball into larger issues. Automated transaction monitoring systems can help flag unusual activity which may indicate potential fraud.
Physical Security Measures:
Businesses should also invest in physical security measures such as video surveillance, access control systems, locks for sensitive areas, etc., to protect their premises from intruders and prevent unauthorized access to confidential information or assets.
Security training is essential for all employees, as they need to be aware of threats and risks that can arise due to their activities or the activities of third parties. Training should cover risk management, social engineering attacks, phishing emails, malicious software, data breaches, etc.
Incident Response Plan:
Organizations should create a detailed incident response plan so that in case of an attack or security breach, the team knows how to respond quickly and effectively mitigate any damage caused. The response plan should include steps for identifying the source of an attack, assessing the impact, and initiating corrective actions such as revoking access rights from compromised accounts or disabling systems temporarily until further investigation is conducted.
Here’s How 7 Figures Funding Can Help!
Do you need help to secure funding for your business? Look no further than 7 Figures Funding! Our company in Brooklyn makes getting the capital you need to take your firm to the next level easy and convenient. So, how does it work? Our process is simple. First, you’ll fill out our online application, which takes just a few minutes. Next, one of our funding specialists will review your application & reach out to you with funding options that fit your needs.
But that’s only part of it – we also offer personalized support and guidance throughout the funding process, ensuring you get the best possible terms and rates. We work with a wide network of lenders to find the right match for your business. Whether you need funding for expansion, inventory, equipment, or anything else, 7 Figures Funding covers you. Don’t let lack of capital hold you back – visit our website today and start the application process. It’s never been easier to get the funding you need to succeed!