Six steps to protect against fraud

While small businesses have the highest rate of fraud and the largest median loss, few put adequate preventative measures in place.

According to the Association of Certified Fraud Examiners (ACFE), small, privately held companies are more likely to become victims of fraud than public companies, governmental and nonprofits, with a hefty median loss of $200,000. Here are some action steps you can take to prevent unnecessary losses:

1. Use a system of checks and balances to ensure no one person has control over all parts of a financial transaction.

2. Conduct surprise audits.

3. Secure digital documents in locked or password-protected files.

4. Create a written ethics policy that is disseminated to all employees and updated annually.

5. Require competitive bidding for major purchases and contracts. Insist that related-party deals — like an employee hiring his sister for freelance work — are fully disclosed.

6. Conduct background checks and consider taking on a business insurance policy that covers employee dishonesty.

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