According to the Association of Certified Fraud Examiners, small businesses are the most vulnerable to frauds. In fact, almost one in every two small business is likely to have faced some kind of fraud at some point in its lifecycle.  On an average, these frauds cause a business around $114,000 per year.

Here are some common types of frauds that happen in businesses:

Payroll

Payroll can be considered as one of the major frauds in small businesses and happens in around 27% of them. Payroll fraud often happens when the employee timesheets aren’t reconciled with the payroll, or reconciled inappropriately. In addition to that, workers getting huge overtime payments when they haven’t actually performed any sort of work are another type of payroll fraud that they face because there is a lack of structure in small businesses, these frauds go undetected and the business owner has to pay the workers their dues as they are legally liable.

Cash Theft

Cash is one of the most vulnerable business assets. Cash theft happens in one of the three ways in small businesses:

• Skimming: When employees don’t record the receipts into the records
• Larceny: when employee takes cash from the cash till after it has been recorded
• Fraudulent disbursement: disbursements of funds without proper authorization or using businesses funds for personal purchases.

These frauds happen because there is lack of cash monitoring processes and supervision on the activities of the employees. No standardization of the accounting processes like in small business accounting services can also be one of the reasons why these frauds happen.

Over-Ordering

Over-ordering of inventory or office supplies is another problem that small businesses have to face. Employees usually make extra orders from the company account, and return the excess items for cash or gift cards once the order is delivered. This type of fraud is extremely hard to detect, especially when there is no internal audit function in the company.

False Invoicing/Fraudulent Transfers

Though not as common as the others, false invoicing has the ability to deprive large sums of money from the business on a single occurrence. This happens when employees setup fake suppliers and make payments to them through the company’s account. Similarly, with the advent of online baking, it is also easy for employees to make payments to fake accounts when they should have been making payments to the actual vendor. One of the main reasons why small businesses are more vulnerable to these frauds is that they do not experts accountants working for them, who can go through their accounts and detect all the potential threats in their systems.

If you are a small business owner and have no idea how you can prevent accounting fraud from your business, then get in touch with us. We are the leading small business accounting service provider in Boca Raton, FL, and provide professional services for bookkeeping, payroll, accounting, tax and many more.