Mitigating Fraud Risks in Small Businesses: Practical Advice for CIBA Members
Fraud can hit small and medium-sized businesses (SMEs) hard, causing financial losses and slowing down their day-to-day work. As a BAP(SA) and CIBA member, you have a valuable role in helping your clients protect their businesses from fraud. By guiding them on a few easy-to-follow steps, you can help them spot, prevent, and manage fraud risks in a way that makes sense for everyday operations.
Why Fraud Happens in Small Businesses
In small businesses, people often wear many hats, meaning one person might be responsible for a range of tasks. This setup can lead to gaps where fraud might slip through unnoticed. Business owners may also lack extra resources for fancy security systems or processes to keep tabs on everything, which is why fraud sometimes goes undetected until it’s done a lot of damage.
Simple Steps to Help Clients Prevent Fraud
Build a Culture of Trust and Honesty
Fraud prevention starts with a workplace where honesty is expected and appreciated. Encourage your clients to be open about the importance of doing the right thing and let employees know they’re valued. When people feel trusted and part of a supportive team, they’re less likely to engage in fraud.
Set Up Basic Checks and Balances
"Checks and balances" simply means putting rules in place to keep track of important things. Even without big budgets, small businesses can easily add a few helpful rules:
Divide Responsibilities: Advise clients not to let one person handle every part of a job, especially with money. For example, if one person buys goods and also makes the payments, there’s room for errors or fraud. Try to have different people in charge of each step.
Limit Access to Sensitive Information: Only allow people access to what they need to do their jobs. Not everyone needs to know about bank accounts or payroll details.
Review Bank and Financial Records Regularly: Encourage clients to check bank and credit card statements, as well as payroll records, on a regular basis. Doing so can help them spot issues early.
Check Backgrounds for Key Hires
For roles involving money or sensitive information, it’s smart to run a background check on potential hires. It doesn’t have to be complicated—just verifying previous jobs and calling references can go a long way.
Use Technology to Track Finances
Technology can help spot unusual activities. Encourage clients to use basic accounting software that records each transaction. These tools often have features that track money flow and flag anything that looks out of the ordinary. Make sure clients also protect their digital accounts with strong passwords and, where possible, encryption.
Create a Safe Way for Employees to Report Suspicious Activity
Sometimes, employees notice things that seem off but feel afraid to speak up. Having a system where they can report things anonymously makes it easier for them to share concerns. Advise clients to set up an easy way for employees to report things quietly if they suspect fraud.
Watch Cash Transactions Carefully
Cash can be tempting, so it’s wise to keep a close watch. Encourage clients to:
Limit Cash Payments: Suggest they use electronic methods that leave a record, like bank transfers or checks, instead of cash.
Count Cash Regularly: A quick count at the end of each day or week can help catch any missing amounts before they add up.
Review Fraud Risks Once or Twice a Year
Encourage clients to take a fresh look at their business and where fraud might sneak in at least once or twice a year. This quick review doesn’t need to take long but can help them keep up with new risks and adjust their prevention methods.
Train Employees to Recognise Warning Signs
Sometimes, employees accidentally allow fraud because they aren’t aware of red flags. A little training can go a long way in helping them recognise things like strange emails, unexpected invoices, or unauthorised requests for information.
What to Do if Fraud is Suspected
If clients think fraud might be happening, suggest these steps:
Record Everything: Keep notes on any unusual activities or transactions.
Call in Professional Help: An accountant or fraud specialist can help investigate.
Restrict Access for the Person Involved: While investigating, it’s a good idea to limit that person’s access to financial systems.
Wrapping It Up
Helping clients prevent fraud doesn’t have to be costly or complicated. By creating a culture of trust, adding a few practical checks, and staying aware of red flags, small businesses can avoid the pain of fraud. With your guidance, your clients can build stronger businesses and stay on track for growth.
Join us for the CIBA Annual Practice Management Conference 2024 here.
🌟 Join Us for the CIBA Annual Practice Management Conference 2024 🌟
Accounting and tax pros, mark your calendars. The CIBA Practice Management Conference is back with a two-day powerhouse experience that’s packed with insights, networking, and the roadmap to level up your practice.🚀
What’s the Deal?
🗓️ Day 1: November 7, 2024
In-Person, at Regenesys Campus, Sandton – It's all about the sectors your clients operate in. From law to tech, agriculture to medical, we’re diving deep into the latest trends to make you the MVP for your clients.
🍸 Wrap up the day with a cocktail party and network with industry peers.
🗓️ Day 2: November 8, 2024
Join us online to focus on the regs. Get the lowdown from top regulators like SARS Commissioner Edward Kieswetter and experts from the FSCA and FIC. It’s everything you need to tackle compliance with confidence. 💻
Why Attend?
🔍 Unlock Sector Secrets: Discover new ways to support clients in key sectors.
💡 Navigate Compliance: Get the latest on CIPC, NLC requirements, and the SME Launch.
📈 Earn CPD Points: Grab 10 CPD points while gaining valuable knowledge.
🎟️ All this for R875 – VAT Included That’s your ticket to a smarter, future-ready practice.