4 types of fraud in business that could put you in a bind

Working in the business is difficult enough when everything goes efficiently. But when you become an entrepreneur, sometimes the unexpected happens. So you have to always prepare for every possible situation, including fraud in business.

Business scams are not as rare as you think. As a business person its always important to know the procedure to prevent and deal with fraud if it triggers to your business.

According to the ACFE, a small business of 100 employees can experience an average loss of $150,000 to $154,000 per year because of fraud. So, it’s important to recognise types of fraud in business.

Here are four important and common types of fraud a business might face:

Payroll Fraud

Payroll Fraud
Photo: Fullempty, BS

According to recent research, payroll fraud occurs in 27% of all businesses. Which is as twice as often in small businesses (less than 100 employees) than in larger business. There are several ways Payroll fraud occur in your business.

  • Sometimes the employee might be lying about hours worked on their time sheet. And sometimes employees may request payment advances without paying them back. Sometimes employees may also help colleagues work, even if they are not present at the workplace.
  • Sometimes the employee requires advanced payments but they never pay it backs. This type of fraud is known as passive fraud. This works best when the accounting staff does not monitor the repayments. Therefore, non-payment of advances requires inactivity on the part of the recipient and an inadequate registration of transactions and a follow-up by the accounting staff. A monthly procedure to review progress will remove this problem. However, to reduce this issue a monthly procedure of review advances can remove this fraud.

Cash Theft

steeling cashier
Photo: StockSnap, Pixabay

In small business sometimes the cash disappear in a very funny way. Sometimes cash disappears when an employee takes cash but does not report in the accounting system. Besides, cash theft also happens when an employee releases funds which haven’t been approved by the owner of the business.

Cash theft can create a negative cumulative impact on the end result. From the start of business creation, the owner needs a streamlined process of ongoing control, both for an efficient financial process and also needs to maintain the supervision of cash. The are other ways cash theft can occur such as:

  • Cash theft often happens when an employee charges the customer with the usual price but pockets money without calling the transaction. Clients who don’t give attention & do not notice that the money they pay does not enter the register.

Return Fraud

Return Fraud
Photo: Aleksei Smolensky, BS

Most of the small businesses selling goods could experience fraud in one way or in another way. There are several types of return fraud a business could face.  However, there are some customers who buy a product, use it, and then return it, although nothing is wrong with it. But there are some customer or fraudsters who steal products from you and again return it to you make a profit out of it. However, following some important steps return fraud could be minimised.

  • Returning fraud can harm your business. You may not be able to destroy all return cheats, but you can limit them based on your business rules and policies.
  • To prevent return fraud your business should tighten up the policies. So that customers receive store credit only after a certain period of time. Even if your business wants customers to be happy, no one wants their company to lose cash from fraud.

False Invoicing

False Invoicing
Photo: AndreyPopov, BS

False invoicing is one of the popular fraud methods. Business owners must have primary oversight of every provider in their business. False or fake invoicing sometimes happens when an employee creates a fake supplier’s and transfers the money to a different account. False or invoicing can be a huge problem for business. For many customers billing at once, it may be difficult to track payments coming in and out.

  • Impact: If business companies or organisation does not check their invoice regularly & properly, they can eventually pay for non-used services which they didn’t use and it can eat up revenue. If they then have to try and claw the money back, they can lose out on time doing so.
  • Prevention’s: If business companies can track their invoices accordingly by using unique purchase order numbers, the business can know what types of invoices they are related to and the business can also ensure that payments go to the right person. However, proper checking of invoices and strict payment terms & condition will be the main key.


Above I have explained four most common types of business fraud which could make a business blind. A business should always follow all the procedures to minimise the fraud in business. A business could lose financially if they cannot detect the fraud in their business.  Therefore, it’s important to take initiative before it’s too late.

MD Forhad Hossain
MD Forhad Hossainhttps://www.sfconsultingbd.com/
S & F CONSULTING FIRM LIMITED is a global business consulting firm. Services are (1) Foreign company registration, formation, setup (2) Income tax (3) Accounting (4) Audit (5) Business advisory. Since 2012, we are providing professional services to foreign investors. We try to develop our self every day to satisfy honorable customers
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