Leo Sun As an owner of a small business, the danger of crippling litigation should also be at the top of your priorities. Legal headaches, especially in America can take you by surprise and severely hurt your business' bottom line. Here are some of the most common legal issues facing small businesses in America. Disgruntled Employees As a business owner, this will be one of the most common legal headaches.
Legal Issues Preventing Small-Business Fraud Small businesses are more likely to become the victims of fraud than larger businesses. In its Report to the Nation on Occupational Fraud and Abuse, ACFE cites that the smallest organizations, employees or less, suffered higher median losses than did the largest organizations 10, employees or more.
Considering the potential losses, it behooves small-business owners to make the prevention of fraud a priority in their businesses.
Though no business owner wants to feel it employs unscrupulous people, sometimes temptation or personal financial pressures can push even the hardest working, most trusted employee into perpetrating fraud.
Through its report findings and the experiences of its members, the ACFE has honed in on effective methods for deterring occupational fraud and abuse. Here, Gill shares some of the most useful approaches, which are also detailed in its book How to Prevent Small Business Fraud.
Some methods seem commonsense, but when taken into consideration with other preventive measures, they help fortify a business against fraudulent activity.
First and foremost, hire the right employees. Conduct background checks for people handling inventory and money. Check past employment, criminal convictions, references, and education and certifications.
Also, conduct drug screening since often, according to Gill, employees will steal from a business to support an addiction. Remember, however, to always get the written consent of candidates before doing research since many federal and state laws govern the gathering of such information.
Maintain strong internal controls. Have checks and balances in place, suggests Gill.
For every expense, have a manager and someone in accounting approve it. The supervisor will ensure that the expenses are valid, while accounting will run the math.
In a retail situation, Gill suggests having security cameras monitor activity at registers and storage areas where inventory is kept. Catching an employee off guard could be your best bet in discovering fraud. Additionally, auditors have sampling and computer data analysis techniques that help uncover fraud.
Using these techniques, auditors can quickly examine, say, the payment of 1, invoices in detail, including invoice numbers, to whom payments were made, and when payments were made, and quickly determine those that are suspicious.
In one case, Gill recalls, an employee who set up a fraudulent business through which he submitted preprinted, consecutive numbered invoices to his employer every few months. A surprise audit also can uncover duplicate invoice amounts and duplicate invoice numbers, both of which can be red flags for possible wrongdoing.
Establish a third-party hotline service. According to Gill, the number one method for catching occupational fraud is getting tips from employees.
Because most employees are reluctant to report suspicious activity, using a third-party hotline offers a level of anonymity that an in-house hotline might not provide, making employees more likely to blow the whistle on fraudulent activity. An outside company is staffed 24 hours a day and provides information to the business immediately.
Create a fraud policy. Simply inform employees during employee orientation, training programs, memorandums, or other communication that fraud is not tolerated and let employees know what to do if they suspect fraud.
Also, be sure to inform employees of the actions the company will take if it suspects or determines fraud has been committed.
Sep 18, More from Inc.A significant amount of check fraud is due to counterfeiting through desktop publishing and copying to create or duplicate an actual financial document, as well as chemical alteration, which consists of removing some or all of the information and manipulating it to the benefit of the criminal.
This course will help you learn to navigate the most common pitfalls, including the legal elements of fraud claims, the rules of evidence, privacy rights and other issues relevant to fraud examinations.
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Mobile App White Small business fraud and the trusted employee Protecting against unique vulnerabilities The company still hasn't recovered from James' fraud schemes. Small businesses are particularly vulnerable to fraud because they lack the resources to implement.
Legal, Ethical, and Professional Issues in Information Security In civilized life, law floats in a sea of ethics. issues related to information security, and about several professional organizations with estab- The Computer Fraud and Abuse Act of (CFA Act) is the cornerstone of many computer-related federal laws and enforcement.
Contract and procurement fraud, collusion and corruption can rob profits from victims. Bid riggers conspire to eliminate fair and open competition and allow some to monopolize industries.
Here’s some help in detecting common contract and procurement fraud schemes, and improving the integrity of the contract-award process. Page 2 | Identifying small-business fraud: Not seeing the whole picture can hurt your bottom line Small-business fraud types Small businesses face a myriad of both first- and third-party fraud behaviors, varying significantly in frequency, severity and complexity.
A first-party, or victimless, profile.