Explain the impact of fraud and why it impacts small businesses to a greater extent than large businesses. What should the owners or managers do to prevent from fraud from happening in the first place?

In the article titled, “Small Businesses Face More Fraud in Downturn,” Simona Covel explains how several small business owners came face to face with fraud within their own company. Small businesses that do not have a checks and balance system in place for employees who handle money are subject to become victims of fraud, especially during these tough economics times. During the economy’s downturn, employees may feel under pressure more often to keep up with their bill payments on time, and to just survive with gas prices steadily rising, and with inflation on consumer products. Employees who have access to company cash and credit accounts can easily dip into a company’s money if they know that no one is paying close attention to their actions or keeping close account of transactions and purchases made by them.

Simona Covel had the opportunity to interview three business owners who all had one thing in common. They had allowed one person in their company too much power.   Simona’s article mentions several helpful tips from worthy sources to help business owners pay attention to employees, and whether their business could be in jeopardy of fraud.

Tips mentioned in the article include:

Being alert to employees who live above their means; employees who guard accounting software, and those who never take vacations. Simona’s source, Mr. Sklar, who is an accountant, also states that business owners should also review every canceled check and look at the signature on the back of them. Furthermore, Mr. Sklar says that business owners should review bank statements every month and check for unusual transfers.

To check out the article mentioned in this post visit:

The Wall Street Journal

“Small Businesses Face More Fraud in Downturn”

By: Simona Covel

Website: http://online.wsj.com/article/SB123501158460619143.html

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1 Comment

  1. Tough economic times really do lead to increased rates of fraud. Often individuals who would never consider fraudulent activity resort to this behavior to pay bills. A business owner that provides no internal controls does their employees a disservice by not having these safeguards in place. It’s a good idea to keep honest people honest during poor economic times.


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