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You Detected Fraud in your Small Business. What Now?

You Detected Fraud in your Small Business. What Now?

With all kinds of legal, functional, technological security mechanisms in place, no business is absolutely secure from fraud. In fact, according to ACFE’s report in 2016, businesses lose an estimate of about 5% of their revenues to fraud each year.

From employee theft and embezzlement to misappropriation of funds, there is a myriad of deception that requires the close attention of experts.

If the plan of prevention doesn’t work and your business falls prey to fraud, it becomes necessary to take legal action. Here is what you can do about it:

Deploy a Team

A team of experts can make your fraud case much stronger, legally speaking. Professionals like forensic accounting expert witness, financial investigators, and computer specialists, all of whom are experienced in handling cases of fraud for business can help you in building a case to save your business. Professional expert witnesses in forensics like Thomas Neches can help you build a strong experts team.

Appointing your own in-house accountants and computer experts to resolve the matter can prove to be counter-productive. This is because they cannot be considered objective when it comes to analyzing data and evidence.

Secure All Evidence

In order to have a clear case, you must safeguard any data or file which you believe is evidence or potential evidence. Apart from securing it, you should also be careful about not intentionally or unintentionally modifying it. If you want to examine any evidence, it should be in the presence of an expert who is experienced in similar litigation cases. Securing computers, hard drives, flash drives, mobile devices, and any other electronic or non-electronic physical evidence should be a priority.

The untampered evidence will make it much easier for an external accounting team to find out the reason, degree, and culprit of the fraud.

Deal With the Suspect

Firing the suspected employee can make it more difficult for the experts to gather evidence and prove a crime. Instead of firing them, you can limit or completely restrict their access to sensitive company data. You can also seize their computer prevent them from moving or using it because it might contain vital evidence. Apart from this, you should also limit their access to sensitive company data and documents in every way.

Inform the Insurance Company

It is common knowledge that in case of any kind of fraud, theft, or loss, one should notify one’s insurance provider as soon as possible. Generally, the required duration is between 30 to 60 days. Any delay in this might cause your business to suffer a loss of coverage.

File for Proof of Loss

If you or your business has incurred any financial losses because of fraud, filing a proof of loss with your insurance company within the allowed time frame is crucial. Since the documentation of loss claims with insurance providers can be a lengthy process, you should not delay. If a delay in filing is necessary, you can request a formal extension of the deadline.

Prevent Fraud Going Forward

Prevention is always better than cure, and cheaper, so it is better to keep an eye out for possible fraud cases and design an unbreachable system of processes in your company.

Some practices to follow include:

  • Parceling out responsibilities and information between multiple employees rather than just one.
  • Ensuring that employee fraud or dishonesty is covered in your insurance.
  • Conducting thorough background checks and verifications of all employees before hiring.
  • Balancing bank statements regularly and auditing your books at least once a year.

There are no fool-proof ways of preventing fraud but these checks and balances can help in increasing surveillance and reducing its likelihood.

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by Harvey Carr // Harvey Carr is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.