4 Major Business Fraud That You Need To Be Aware Of

Thriving a business can definitely be a daunting task. However, when you are an entrepreneur, there are high chances that you can fall into the trap of fraudsters, and hence it can cause diverse impacts on your business.

This is why you need to be prepared beforehand to deal with such situations. This guide states the 4 Major Business Fraud risks that can occur in your business. Through this guide, you will know the potential types of risks to fight them accordingly.

Four Types of Business Fraud

  • Identity Theft

One of the major business threats that you need to be aware of is the identity theft. This can cost you thousands of dollars. Generally, in this thread, fraudsters steal your business identity, thereby using it to access your credit. The bank statements, federal tax identification numbers, financial statements, and other confidential documents can be at significant risks. At times, they even steal the complete information of your system.

To avoid such circumstances, ensure keeping all your confidential and sensitive information in place. In case you have physical copies, lock them inside your cabinet that has only your access. If you have digital copies, try using a difficult username and password to prevent phishing. And most importantly, never share or allow anyone to access your information.

As stated above, frauds can even have illegal access to the bank account linked to your business. As a result, employees lose their paycheck. Paychecks are extremely sensitive as they comprise your business bank account number and routing.

In case a lost paycheck gets to wring hands, fraudsters can use it to withdraw money from your bank.

To avoid this, you can separate your business payroll account from the other business money. In case you have a separate payroll account, fraudsters will only have access to restricted funds. Deposit the specific amount used to cover the employee paycheck. You can even start paying your employees through direct deposit and not paychecks. Direct deposit puts the salary straight into the employee’s account. This does not need any pass or sensitive information.

  • Money Fraud

Another major part of business risks includes Money fraud. Or let’s just say, more than major. There is so much illegal circulation of cash in several countries that it gives rise to fake bills. Money fraud is something that can occur at any point in time without even showing signs of it to your or your customer. However, counterfeit money becomes worthless while you deposit the same to the bank.

One of the most common counterfeit bills is extremely high valued, such as $100 bills. In case you accept any of the counterfeit money, you will gain zero revenue from the sale. You can even end up providing original currency in return for a fake bill in the worst of cases.

Make sure you protect your small business or any business regardless of its size from money frauds by getting a good piece of knowledge on differentiating between fake money and original money. You will find several features in legal currencies like watermarks raised printing, color-shifting ink, microprinting, etc. Moreover, make sure you educate your employees on how to cross-check the cash before accepting it.

  • Payroll Fraud

Another major common threat is the payroll schemes. It is as common in small businesses or organizations similar to the ACFE in larger companies. There are distinct ways in which payroll fraud can take place in your business.

Here, employees may demand advance payment without paying them back. Most of the time, employees even lie about the number of hours that they have workers.

To avoid this, do a thorough background check on each of the employees before you conclude to hire them. Ensure you audit payroll accounts to detect and catch the early behavior of frauds just in case. A genuine employee will never raise questions about security. 

Make use of SaaS payroll services to approve the payroll long before you pay your employees. Moreover, you can even keep a fine track of their pay rate along with the working hours of employees in your system. Never wait until the time your business doles out and your employee starts eyeing the huge sums of cash.

  • Return Fraud

Regardless of their size, small to medium, most of the businesses that deal in selling have gained a good experience in return fraud by different means. Usually, there are a variety of return frauds. The most common type is some consumers purchase a certain product, use it, and return it even if there are zero defects. In most cases, you can even discover fraudsters who steal certain products from you in an attempt to pay them back to make a profit. 

Usually, return frauds can be extremely harmful and demanding to your organization and our business at high risk. Although you might not be capable of eradicating all the return grids, you can definitely restrict it based on your company policies.

To avoid return frauds happening in the future, you will need receipts. Furthermore, you can even put more pressure on tightening your company policies so that the consumers receive only the store credit after a specific period. We understand you always want to keep your consumers happy, but hurting your business and putting its security at stake must be the last thing you would want for your business. 

  • InvoiceE Fraud Schemes

This sort of fraud happens when the fraudster (regularly a worker in sales or accounting) makes fake solicitations to take cash from the business. This could mean invoicing for items and administrations that were rarely purchased, making a fake or phony provider/shell organization to pipe the cash to, or granting over-expanded agreements to close companions and family. 

Step by step instructions to stay away from it: Cross-check each invoice with actual goods and services bought. Do far reaching and comprehensive background verifications prior to endorsing another provider.

Red flags that you are required to watch out for in your organization today 

Over time, you must have been quite relied on by your staff. However, make sure you notice the changes and red flags. Trusting them blindly can create major room for business frauds. Some red flags include:

  • Deletion or inaccurate calculations in financial data
  • Unexpected hikes in business profitability
  • Inappropriate selection of accounting policies by management
  • Reporting the revenue after period cutoffs
  • Potential judgment and changes in financial estimates
  • Negative cash flow

You will usually notice such abnormalities in the finance department of your business. Ideally, they are even the first ones to raise the issue. However, if you are sure that someone in your finance team is doing the fraud, it can be difficult to identify them.

Several other fraud protection tips

Here are five extra tips by which you can be more aware of frauds.

  • Encourage your employees to inform or report immediately when they see red flags. Make this fraud reporting culture compulsory in your workplace.
  • Implement surprise audits
  • Inspect regularly
  • Make sure your company has specific anti-bribery, anti-corruption, and anti-fraud company policy
  • Implement all the policies, consequences, and regulations in case any employee violates your rules


Regardless of the niche, size, or nature of your business, all organizations are vulnerable to attack fraudsters in case they are unaware of the different ways to manifest the fraud. With this, we come to the end of this discussion. This guide states four Major Business Fraud risks that you must be aware of. Once you reach out to the root of the fraud happening in your business, you can implement more security measures to secure your business.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.