Many small businesses have the luxury of a close knit group of employees. Despite trusting one another, it is important to take necessary steps to prevent fraud and embezzlement from becoming a temptation or reality. According to the Chamber of Commerce, fraud or embezzlement costs small businesses between $20 and $40 billion dollars each year, and many times is detected too late. The good news is that with a few painless precautionary measures, you can ensure your business will be secure.
Be aware of the three main factors that typically lead to fraud within an organization (sometimes referred to as the “Fraud Triangle”):
1. Motive (or pressure) – the need for committing fraud (need for money, etc.);
2. Rationalization – the mindset of the fraudster that justifies them to commit fraud; and
3. Opportunity – the situation that enables fraud to occur (often when internal controls are weak or nonexistent).