With the new financial year upon us and many businesses focusing on ways to maximise their bottom line, it’s vital SMBs invest in measures to mitigate the risk of fraud.
Fraud is still one of the biggest threats to small and medium businesses, with Queensland businesses the most affected organisations in Australia.
HLB Mann Judd Brisbane Audit and Assurance Partner Chris King said that whilst up to 50 percent of businesses are affected by fraud, just 10 percent are aware of it.
“While every business understands the importance of focusing time and money on strategies to minimise tax, they should also be looking at systems to avoid fraud. Fraud comes in all shapes and sizes, from stealing a ream of paper to millions of dollars in cash or stock,” King said.
“It also affects businesses of all sizes and in all sectors, and businesses undergoing change – whether that be growing or downsizing – are most at risk.”
For SMBs that can’t afford internet audits, fraud presents a major threat that often goes undetected, and whilst many businesses feel protected by technology it actually provides another avenue for fraudsters to attack them.
According to King, there are some traditional areas where fraud is perpetrated:
- Stolen stock is probably the most common, which can range from just a ream of paper to a case he saw in New Zealand where a hospital employee furnished his whole house with stolen goods.
- Payroll fraud, which can be perpetrated through directing funds to a dummy employee on the payroll or diverting union fees into another account.
- The third most common area of fraud is around the security of cash and cheques. When a company has a single signatory system it leaves them vulnerable as does the accessibility to cash.
To help protect your business against fraud, Chris King said there were several things to take note of.
“Employees often commit fraud to support a lifestyle or addiction, and it can be brought on by significant life changes like a marriage breakdown. Telltale signs of fraud are when people start living outside their means, buying new cars and homes or taking holidays when they never did before.”
If fraud is discovered, it’s important that employees and management understand whistleblower legislation and the mechanisms for reporting fraud.
“Employees and businesses must protect themselves and ensure they can present a strong body of evidence for the perpetrators to be prosecuted,” King said.