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10 Warning Signs of Company Fraud

by Aaron Jaeger | Dec 9, 2020 | small business, financial fraud, employee fraud, mule accounts, account takeover, SMB, business risk, embezzlement | No Comments

Estimated Read Time: 1 minutes –

Globally, it is believed that 5% of revenue is subject to fraud – that’s $4.5 Trillion (with a ‘T’) in annual losses due to fraud.  Fraudsters affect everyone and any type of business.  Whether a small, private company or a $1B publicly traded company, there is an equal chance of exposure to a fraud scheme.

Unfortunately, if you are a business with under 100 employees, a fraud scheme will typically be more painful, statistically having double the losses than that of larger firms (a loss due to fraud with a small business average $200,000). According to Smart Payments, 43% of financial institutions expect employee fraud rates to have significantly increased in 2020, a rise largely due to increased personal financial pressures as a result of the pandemic. 

While fraud can occur in many ways, small and medium sized (SMB) businesses have significantly higher risk profiles with transactional activity, specifically billing, payroll, and check/payment tampering.

Fortunately, there are steps to be taken to mitigate the risk of financial fraud that many small and midsize businesses do not take advantage of. One-third of fraud cases are attributed to a lack of internal controls. By establishing internal controls, it is proven that fraud losses are detected early and mitigate the company’s losses. 

Understanding where threats can come from is critical. These are some of the most common warning signs of embezzlement and employee fraud: 

10 Signs Of Company Fraud:

  1. Delayed bank deposits 
  2. Bank reconciliations have too many outstanding checks and/or late 
  3. Disappearing petty cash or frequent need of replenishment
  4. Increase in credit card balances 
  5. Vendor addresses are the same as employees 
  6. Vendors complain of late or no payments 
  7. Accounts receivable & accounts payable balance sheet amounts do not agree with the subledger 
  8. No documentation for disbursements such as receipts or  expense reports 
  9. Financial reporting system "a mess" 
  10. Customers complain they have already paid invoices 

For further insights or for step-by-step advise on how to mitigate financial fraud and protect your business, contact Aaron Jaeger, President CredoCFO.  

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