Xero – Gold Partner

Protecting your business from fraud

Research suggests that over 70% of small businesses in Australia have experienced some type of fraud or financial crime – scary!

Unfortunately fraud occurs more often in smaller family owned business, due to the trust factor.  Team members are often seen as ‘one of the family’ and as such there is often inadequate separation of duties and other checks and balances in place.

It may be surprising to know that the majority of fraudsters are middle aged women with most (87%) never having been convicted of an offence.  The median loss from fraud is approximately $150,000.

Reading this, and given the statistics, I am sure that most of you have either had a similar experience or at least know of an associate who has.

So as business owners and managers, what are the risks you face, what can you do to prevent a fraud and in the event that you are the victim, what should you do?

When are the times of highest risk to the business?

  1. During periods of high growth (systems and processes are unable to keep up)
  2. System changes (e.g. new payroll, accounting, inventory)
  3. During tough financial times (financial pressure, reduced staff, lack of segregation of duties)

What are the warning signs to look out for?

  1. Failure to provide financial information
  2. Failure to cooperate with management
  3. Failure to take leave, early starter, late finisher
  4. Poor record keeping
  5. Unexplained decline in cash flow
  6. Worsening of key indicators (e.g. increase in payment terms to suppliers)

 What are the controls you can put in place?

  1. Strong policies and procedures and follow through on actions
  2. Documented policies
  3. Effective security
  4. Employment screening (police checks)
  5. Regular risk assessments
  6. Trust your gut instincts – if something doesn’t seem right, it probably isn’t
  7. Have appropriate insurance

 What can you do if you are the victim of fraud?

  1. Keep team members on a need to know basis
  2. Gather all relevant evidence
  3. Engage all relevant stakeholders (e.g. bank, suppliers)
  4. Use qualified expert investigators (e.g. IT, forensic accounting)
  5. Do not confront the suspect until you have evidence
  6. Notify police and insurers

Whilst it is disappointing to think that you could be the victim of fraud, it is essential that you appreciate that all businesses are susceptible.  As such you must have a plan to respond and recover.

Please contact Altitude Advisory for more information.

Luke Talbot-Male, Adventures Beyond

Gloria Rowett, Marion Holiday Park