Avoiding the fraudsters

"What is the best way for a small business to avoid the attention of the fraudster?" asks certified fraud examiner Mark Jenner. It is not easy to make the first step when starting a new business from home. It can take some years just to make the first move.

Eventually the planning pays off and a business venture begins. It seems that most do not consider the risk of fraud at this stage but leave it until they uncover their first loss!

Fraud is a business risk. Problems with locating customers and seeking suppliers of goods are business risks that the new venture will have to face. Sub standard performance or even business failure can result from problems concerning the latter, with similar results from the work of the fraudster.

When a business is struggling to find its feet, it can be vulnerable to a number of different frauds. In particular, in its enthusiasm to find new sales, it may sell to customers on credit who have no intention of paying or at best are having their own financial problems and are close to failure themselves.

Another favourite fraud is the sale of goods that will have no commercial worth to the business, usually by hard selling techniques over the telephone. Support publishers fit this category and will attempt to get the unwary to pay for expensive advertising in a magazine or booklet in support of some charity or good cause. Very little if any money goes to a charity and the publications will not be circulated to good effect. Most of the revenue usually finds its way to the crooks pockets.

Fraud prevention controls in a business are very cost efficient. You should take a while to think about the risk of fraud to your business, an activity that will only cost you your time. Fraud targets those that are complacent about it. The National Fraud Authority estimates the economic cost of fraud in the UK to be &pound30 billion every year. Much of this - and much more that will never be reported - is fraud found in small new businesses. If the owner manager takes some time to simply think about where losses might occur, the chances are that he will prevent those losses from ever taking place.

The managers of new business start ups are often financially naive to begin with. With the best intentions to make a success they may not be ready for the financial burden of running their business. Chances are that they were excellent at the technical aspects of their professions, even good at selling their trade, but managing finances may have to be learned afresh.

Therefore, when starting a new business it pays to spend a few hours writing a fraud prevention policy. This need only be a few sides of paper that sets out the key areas of risk and what the owner thinks he needs to do to avoid losses. A lot of fraud will be prevented by this exercise and also the new proprietor will get a much better overall grip on his new venture.

Mark Jenner is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. His forensic accountancy business undertakes fraud investigation, asset tracing and money laundering prevention. He also advises on small business opportunities. His web site provides free advice and useful articles www.mark-jenner.com