Small business operations usually have a harder time detecting fraud. As a small business attorney, if you are just starting out, it is important to know that fraud happens easily. In fact, employer fraud is one of the most common ways it happens. Here are 10 ways that you can minimize fraud in your small business:

1) Supervise Your Employees

Whenever supervision is lax, fraud rates go up in companies. It is essential to check in on every employee. Even the most trusted employees need to be considered when looking for fraud within the company because they know the company and the inner workings really well.

2) Screen Job Applications

Gathering information on an employee’s character is effective in reducing fraud. Going through background checks and references can give you an idea of who the person is. However, some of those who do commit fraud have a clean background. However, it is important to know who you are hiring regardless because they will be handling money, high value merchandise, and will also be handling confidential financial and customer information.

3) Cash Controls

Secured stocks and an approval process in place is important in detecting fraud. Regularly review your accounts payable and disbursements to make sure every pay is legal and legitimate. Some employees pay fake vendors easily when committing fraud. Make sure your bank accounts are reconciled regularly.

4) Segregate

Duties need to be segregated in order to prevent fraud. One single employee should not be writing checks, making transactions, or reconciling the bank accounts, this only makes the company susceptible to fraud. Make sure you involve multiple employees with these tasks. Physical and financial assets and accounting systems should only be authorized to certain employees. There should also be certain policies with how transactions are recorded, initiated, authorized, and reviewed.

5) Communication

If you do not communicate with your employees from the beginning, then your employees will more likely commit fraud in your small business. Implement policies and consequences of fraud regularly to your employees. Have an open dialogue with your employees often in order to prevent them from wanting to steal from the company. Although employees are more likely to commit fraud than anyone else, it is good to implement training sessions on how to handle basic security threats and for preventive measures as well. Teaching them how to handle confidential information, customer information, and financial data can prevent fraud as well.

6) Positive Work Environment

Creating a positive work environment for your employees encourages employees to follow and implement your policies and procedures. If you treat your employees fairly, have clear policies and procedures, and have a good line of communication with your employees, than theft and fraud will not be likely to happen.

7) Reporting System

Having an anonymous reporting system in place for all employees, vendors, and customers. This will make it easier for individuals to report fraud or any other violations of policies and procedures. Make sure you promote and encourage people to use this anonymous reporting system often. All reports should be taken seriously and looked at thoroughly. Any incident, big or small, should be acted upon and investigated thoroughly in order to reduce losses and figure out the next preventative steps.

8) Audits

Having random and unannounced financial audits and fraud assessments allows you to identify where the issue lies, vulnerabilities, and figure out how effective current controls are. This lets the employees know that fraud prevention is a high concern and priority, thus deterring them from trying in the first place.

9) IT System

Small businesses should have a firewall setup and a malware, spyware detection, and a anti-virus software. Make sure you backup everything in the system in case of a cyber-attack. In order to protect your IT system is to implement a password policy. Make sure you change the password at least every month or 90 days. These passwords should also be complex and should be different for every online and systems account.

10) Insurance

In case of a fraud that does happen, it is important to purchase an insurance policy to cover damages and protect against losses from fraud and theft. Have an open communication with your bank in order to know exactly what they can do to help out with your credit card and bank account when a fraud happens.