Protect Your Business: 11 Signs of Business Fraud You Should Know About

Protect Your Business

It is estimated that the global annual loss from fraud for businesses is $4.5 trillion in revenue.

All types of enterprises, whether big, small, new, or old, have equal exposure to fraud. While there are various ways for malicious schemes to affect companies, smaller organizations with less than one hundred employees have higher risk profiles. Fortunately, by learning about the following fraud signs, you can easily detect it and mitigate losses early.

Employee Behavior

Employee Behavior

A high turnover is a sign that something is wrong within the business. For example, if new employees resign within a short period, especially from leadership positions, it could indicate that they are uncomfortable with how operations are run within the organization.

It could also be laxity towards how internal fraud schemes are dealt with or the culture making room for fraudsters. Other employee behaviors that could be indicators of fraud are quitting right before an audit, stiff resistance and opposition to change, and unwillingness to involve other colleagues in individual operations.

When employees’ living standards exceed what they earn from the company, it could indicate that they are helping themselves off the enterprises’ assets.

Frequent Complaints

When you receive numerous complaints about a particular employee, especially in a senior rank, chances are high that it is more than just normal venting. Take time to investigate the complaints and learn more about the situation.

Customers frequently complaining of under-packaged goods or under-delivered products shouldn’t be ignored. It can be a sign that someone is playing you, and deliberate actions should be taken to fix it.

Billing Manipulation

Most organizations are majorly exposed to fraud through the accounting department. This is more likely if one person receives and reconciles financial statements. It makes it easy for them to make alterations to the billings, such as soiling invoices with incomplete information, altering the details, and manipulating bank statements to cover fraudulent activities.

A thorough review of credible bank statements should reveal such fraud schemes.

Exceptional Business Performance

While all businesses aim to perform well, it might be a cause for alarm if one firm reports profit margins that are way above the market. If they have beaten the competition by record numbers and sales forecasts are way above normal, that’s a cause for alarm.

If you suspect something is off, there is a possibility that there could be some illegal accounting transactions behind the success. Most fraudulent schemes by accountants are smart and hard to detect.

Missing Office Items

Fraud starts small, especially in organizations where big schemes are easily noticeable. It might be employees walking out with office supplies or other office property in undetectable amounts. When this keeps happening over a prolonged period, it might prompt the employee to make additional orders and purchases using your assets to cover the missing items.

This might turn into a big micromanagement expense that would greatly cost the business.

Many Adjusting Entries

A fraudster in your enterprise could also be creating fake invoices that pay the imaginary vendors they come up with in the system. This is one of the ways an organization can adjust entries as a way to cover up for misappropriated funds.

When an adjusting financial entry is not accompanied by corresponding and reasonable notes justifying it, it is usually to cover up certain illegal transactions.

Duplicated Payments

When artificial intelligence programs run daily operations, the chances of making errors are low. Although not common, human errors are unavoidable. However, some employees intentionally duplicate payments, showing both real and fake vendors.

Processing fake transactions is an intentional step to commit fraud; hence, serious action should be taken to deal with it.

Boycotting Annual Leaves

According to the labor law, workers are subject to annual vacations, paid and sick leave, public holidays, and weekends off work. Different organizations have their ways of implementing off-days. When employees hesitate to take these statutory off days when due, it is a red flag that something fraudulent is occurring.

Unless it is a mutual agreement between an employer and employee or unavoidable circumstances due to the nature of the work, it’s unacceptable. Shady employees usually use this strategically to ensure that no one uncovers their malicious schemes like missing transaction history.

Missing Documents

Missing Documents

Every once in a while, an organization might lose some documents. However, if this is prevalent, it could indicate that someone in your team is intentionally losing the files.

If records such as vehicle registration, checkbooks, transaction books, or inventory reports go missing, that is a pointer towards serious mismanagement. Business owners should, therefore, occasionally check to confirm the availability of sensitive documents.

Shrinking Business Inventory Documents

Like households, organizations are likely to misplace a few items, especially when relocating. If audits detect shrunk inventory, such as a random reduction in stock, it could be a key indicator pointing to fraud within the business.

It is important to take random stock records and compare them with previous records and future projections.

A Random Rise in Invoices

Growing businesses tend to have a rising curve with the number of invoices as they carve their way through the industry. However, unprecedented spikes in number are good hiding spaces for internal and external fraudsters.

In most cases, some orders made are unfulfilled and received payments are unrecorded. Record all sales transactions promptly to avoid such fraudulent entries.

How to Prevent Business Fraud

Here are some of the tips that will help business owners keep their companies safe:

  1. When somebody informs you about the company’s transactions, don’t just take their word for it. Always verify and double-check the necessary details. If you don’t have time, find individuals you will trust.
  2. When someone you don’t know sends you invoices, beware. In this case, to understand who stands behind this, you can use Nuwber, a people search website with hundreds of millions of records of US citizens.
  3. Understand which areas of your company are more susceptible to fraud. Imagine that you’re a fraudster and think about which spheres of your business you would target first.
  4. Teach your employees about the best ways to prevent and mitigate fraud. Even if you think that they know enough, there’s always something to be aware of.


Fraud thrives as a result of insufficient internal controls. Additionally, scams and fraudulent activities can be hard to detect. Flagging these signs is as important as the measures taken against them. For an effective system to fight fraud in an organization, there should be a culture throughout the business advocating strongly against it. Use the above indicators as telltale signs of something wrong in your organization and conduct a detailed investigation.

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