How Small Businesses Can Combat Fraud Risks
Small businesses are at the greatest risk of becoming victims of fraud. This month in the Small Business Monthly “Financial Fitness” column, Karen Stern, Partner in Charge of the Brown Smith Wallace Entrepreneurial Services Group, discusses some of the ways small businesses can proactively prevent and detect fraudulent activity.
Organizations of all sizes are at risk of falling victim to fraud schemes, but it can be particularly harmful for small businesses. Small businesses not only have fewer resources, but they also often require a greater level of trust in their employees due to a lower ability to implement anti-fraud controls.
According to the 2018 Report to the Nations released by the Association of Certified Fraud Examiners (ACFE), small businesses experienced both the greatest percentage of fraud cases and suffered the largest median loss due to fraud (at approximately $200,000). However, the data also showed that organizations that use active methods of detection, such as data monitoring, can reduce their fraud losses by an average of 67 percent and detect scams in one fourth the time.
Organizations can reduce the impact of fraud by pursuing internal controls and policies that proactively detect fraud, such as:
- Thorough management review
- Account reconciliation
- Document examination
- Continuous data surveillance and monitoring
Understanding how fraud schemes are detected helps inform how your business can implement effective prevention strategies. Businesses that do not actively seek out fraudulent activity are more likely to experience fraud for much longer and at a much higher cost than those utilizing active detection methods.
Don’t miss our Q3 Advisory Risk Briefing event, which includes three options for attending: Thursday, September 12 in St. Charles; Friday, September 13 in Creve Coeur; and Wednesday, September 18 via live webinar. Joe Montes, Advisory Services Principal, and Ron Steinkamp, Advisory Services Partner at Brown Smith Wallace, will discuss how organizations are using data analysis as a tool to identify, detect and monitor fraud.
To discuss fraud prevention or the benefits of a fraud risk management program for your small business, contact Karen Stern, Partner in Charge, Entrepreneurial Services Group, at 314-983-1204 or firstname.lastname@example.org.