One of the most common ways that businesses lose money is through fraud and scams.
According to the Association of Certified Fraud Examiners (ACFE), U.S. Businesses lose an average of 5% of their gross revenues to fraud each year. Based on this statistic, it is clear that protecting your business from fraud and scams should be at the top of every business owner's priority list. Unfortunately, this is much easier said than done. Due to the fact that there are so many different types of frauds and scams, it is nearly impossible to successfully protect yourself from each one. That is why it is essential for business owners to know which types of fraud they are most susceptible to based on their industry. That way, they can focus on protecting themselves from frauds that pose a high risk to their specific industry. Although it may seem like an impossible task, there are steps that you can take in order to minimize your business's risk of being affected by fraud. In this article, we will discuss two industries and the types of fraud that they are most susceptible to. In addition, we will also be discussing the two most common types of business fraud and how to protect your business from them as much as possible.
It could be argued that employee fraud is one of the hardest types of fraud to fight against. This is because your employees are the last people that you would think would steal from you. After all, you hired them in the first place because you trusted them. Some examples of employee fraud include fraudulent workers compensation claims, embezzlement, and the stealing of supplies from the business.
Although employee fraud is the hardest type of fraud to detect and fight against, there are some steps that you can take in order to decrease the likelihood of your employees stealing from you. One step that you can take is to conduct a background check of every employee that you currently have, or are considering hiring. In doing so, you can get a better understanding of the type of person that works for you, or will be working for you. When conducting these background checks, you should be looking for things like criminal history, verification of education, credit history, and past employment. All of this data will help make it easier for you to hire people who will not steal from your business. Another way to prevent employee fraud is to keep track of your business's finances and inventory on your own. Staying aware of your finances and inventory can help you more easily identify when someone is stealing.
The next type of fraud that we will be discussing is customer fraud. Customer fraud is essentially when a customer finds a way to get something from your business without having to pay for it. There are many ways that customers can do this. For example, they can write a bad check, use a bad credit card, shoplift, or return something for a refund that they never bought in the first place. Just like employee fraud, this type of fraud is hard to detect.
Although identifying customer fraud can be difficult, there are some measures that you take in order to help minimize the rate at which customers attempt to steal from you. One measure that you can take is to train all of your employees on how to identify counterfeit currency, bad checks, and bad credit cards. Once you and all of your employees know how to do this, it will make it that much harder for customers to steal from you. Another measure that you can take to reduce customer fraud is to double check everything. For example, the next time you give a customer their purchase, double check that their payment has cleared before actually giving it to them. The third and final thing that you can do in order to mitigate customer fraud is to set up security cameras and security systems throughout your store. Doing this will greatly reduce the number of successful shoplifting attempts.
The Retail Industry
The retail industry is at a higher risk of employee fraud than it is of consumer fraud. This is because most stores already take the necessary steps in order to reduce customer fraud. For example, earlier in the article we discussed that one of the ways to reduce customer fraud is to train employees on how to spot counterfeit currency. In addition, setting up cameras and security systems in your store also do an excellent job of reducing customer fraud. The good news is that most businesses in the retail industry already do this. However, what they do not do well is making sure that their employees do not steal from them. According to a study conducted by Static Brain, 75% of employees who have stolen at least once from their employer. This is why the retail industry is much more vulnerable to employee fraud as opposed to consumer fraud.
The way to help reduce employee fraud in the retail industry is to do extensive background checks on your employees, and to keep track all of your business numbers yourself. In doing so, you will help reduce employee fraud drastically.
The Shipping Industry
The type of fraud that the shipping industry is most vulnerable to is customer fraud. This is because when you are an ecommerce based store, or a store that relies heavily on shipping packages to consumer doorsteps, the majority of your revenue comes from online purchases. Since it is much easier for a consumer to get away with using a bad credit card online than it is in a store, the shipping industry is at a greater risk of being scammed than a standard brick and mortar store.
The way to help eliminate customer fraud in the shipping industry is to never send a package to a consumer until their payment has cleared. Just by doing this, the shipping industry as a whole can decrease their customer fraud tremendously.
In summary, most businesses lose out on a lot of revenue each year due to fraud. That is why it is so important that as a business owner, you do everything in your power to stop it. Unfortunately, eliminating business fraud completely is an unrealistic goal. There will always be people trying to steal from your business, and there will always be people who get away with it as well. However, if you follow the advice in this article, you will greatly minimize your risk of being affected by business fraud.