How Can Small Companies Protect Themselves from Fraud?

 Posted on August 30, 2023 in Business Law

One of the most common causes of small businesses failing is fraud. While this fraud can come from outside sources, the most significant threat comes directly from the inside, committed by employees. It is critical for small business owners to take the steps to ensure that they protect their companies and develop strategies to fight fraud. The following is a brief overview of some of these steps. For more details about effective strategies, contact a Florida business lawyer.

Due Diligence in the Hiring Process

One of the most important steps your business can take in preventing fraud is to make sure the people working for you are of good moral character. It is strongly recommended that you conduct background checks before hiring employees.

While background checks are essential, it is also important to get to know the people who work for you once you hire them. The more you know an employee, the more you can determine what type of character they have that could raise red flags regarding their trustworthiness.

You also want to ensure that all employees are trained in the potential types of fraud that can occur in the company and how to recognize suspicious activity that could indicate problems. Some of the topics employees should be trained in include invoice manipulation and social engineering ( i.e., phishing, baiting, tailgating, dumpster diving, scareware, etc.)

Whistleblower Process

If an employee does discover potentially fraudulent activity, companies need to have a safe and confidential process for that employee to report the information without fear of any retaliation. The ability to report anonymously can help foster a safe environment for the employees and the ability for the business owner to deal with fraudulent activities that might have otherwise gone unnoticed, which could ultimately cause significant financial damage to the company.

Due Diligence with Customers and Vendors

Since fraudulent activities can also come from outside sources, it is also important to do due diligence regarding the customers and vendors your company interacts with. Before entering into any kind of business agreement, it is critical to verify the legitimacy of the company or organization you are dealing with. This includes obtaining references, conducting background checks, and making sure their financial standing is what they are claiming it is. Watch out for any irregularities with customer transactions as well.

Contact a Fort Lauderdale, FL Business Lawyer

If you would like to learn more about the steps you can take to protect your company from potential fraud, call The Elliot Legal Group, P.A. at 754-332-2101 to schedule a private consultation with one of our dedicated Broward County business attorneys.