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5 Leading Types Of Scams In Business To Be Wary Of

Fraud cases alone can cost a company up to $ 500,000 in capital. However, this does not take into account the other important resources that are lost, such as time, productivity, reputation and loyalty.

If someone infiltrated the business, they could gain access to profits as well as sensitive information, intellectual property and documents. Compromised bills, payroll, credit information, assets and identity can put a company's future at risk. Established partnerships can be terminated, customer loyalty can decline, and employment can decline due to broken trust and fear of exposure.

When businesses fall victim to fraud, they may not be able to recover all of the lost capital or receive compensation. Therefore, organizations need to take preventive measures to reduce the risk of fraudulent events.

With automated tools such as predictive analytics software, organizations are alerted when unusual values ​​or activities are detected. This allows management to quickly troubleshoot problems and secure systems to ensure that capital and sensitive data are protected.

First, companies should understand the various types of fraud they face in order to properly prepare and protect their businesses.

5 main types of

Fraud can arise from internal sources such as employees or external individuals such as customers or hackers. Regardless of the perpetrator, however, organizations need to understand the various threats they may encounter and how they could affect their organization.

Common types of fraud that occur within businesses are-


Identity theft Identity theft could cost a company thousands of dollars to regain access to their identity and all credit lines. Thieves could win financial statements, tax returns, and bank documents, thereby compromising both corporate identity and financial information.

Regardless of whether company information is stored as physical documentation or in a virtual database, companies need to ensure that their financial statements are secure. Digital data records should be protected by a firewall and only be accessed by authorized users with specified user names and passwords. Physical papers should also be kept under lock and key and only accessed by verified workers.

Identity theft can also occur when a check is misplaced and ends up in the wrong hands. A fraudster could possibly withdraw funds with the account and the routing number. Therefore, companies should consider setting up a separate payroll system and using electronic fund transfers (EFT).


According to the Association of Certified Fraud Examiners (ACFE), payroll fraud is twice as likely in a small business than a large company. Accounting fraud can occur in a number of ways, including-

  • Inflating Hours - The Most Common Wage and payroll fraud occurs when employees easily inflate their recorded hours. Incremental inflation gives workers small wage increases in the hopes of being overlooked and avoiding system warnings. This can happen if an employee is still trapped while not working, manually entering additional hours, or buddy punching.
  • Do not reimburse advance payments - In rare cases, an employee can ask his supervisor for an advance payment. However, most payroll records don't take these scenarios into account, so it's easy to forget. This allows unwilling employees to receive additional payment without the intention of paying back the advance payment.
  • Changing the wage rates - Although very unusual, some employees work with payroll advisors who have access to the accounting system to inflate hourly wages. This requires the authorized user to temporarily change the payment before approving payments in order to avoid triggering the system.
To combat these risks, organizations should run background checks on new hires to ensure they do not have a criminal record or questionable work history. Businesses should also conduct regular payroll audits to keep track of all outgoing funds and hourly wages to ensure accuracy.

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3. Monetary Fraud
Money fraud can result in counterfeit invoices and physically steal cash from a company.

  • Fake bills - Unfortunately, fake bills can be Invoices are overlooked on first purchase, but are checked as soon as the company attempts to make a deposit. This leaves the company with lost shares and revenue. Therefore, companies should train employees on how they can actually decipher counterfeit currencies using physical characteristics. Differences in microprinting, watermarks, raised printing and colored ink are signs of counterfeit money.
  • Cash theft - Most small business fraud occurs through cash theft by internal employees. Skimming, Cash Larceny, and Register Withdrawals are the most common employee cash scams and can cost businesses hundreds of dollars. To prevent employee fraud, companies should continuously monitor the registers and have managers count the cash drawer at the end of each shift.

4. Return fraud
There are many types of scams, but any one can compromise a company's inventory and financial information. Some customers may purchase an item and try to return the product after using it for a refund. In this case, the business with a defective item and a loss of sales remains. Other customers may steal products and try to return them for a refund, claiming they lost their receipt in order to make a profit.

However, companies can prevent return fraud by implementing strict policies that require physical or digital receipts or loyalty profiles to verify purchases. Businesses can also limit the return time so that consumers can only receive a credit or refund within a small window. These guidelines minimize the risk of receiving a used or stolen item.

5. Employee compensation fraud
Most states require companies to purchase indemnity insurance if workers injure themselves or fall sick on the job. However, some workers have found ways to take advantage of this compensation. Employees can submit employee compensation for an injury that occurred outside of work or an illness that was entirely made up.

The only way companies can prevent this type of fraud is to keep detailed documentation of all operations and employees. Regular reports describing problems or accidents during the tasks can help create a schedule and provide evidence if a false claim is suspected.

Unfortunately, business fraud can come in many forms, making it difficult to detect unless management is aware of the common fraud. To protect against fraudulent activities, companies should implement training courses, regular audits and monitoring software. These fraud prevention techniques can save businesses the capital, effort, and time required to reconcile lost assets.