Watch Out for These 4 Common Types of Small Business Fraud

Watch Out for These 4 Common Types of Small Business Fraud

Starting a small business can be extremely rewarding. When all of your hard work accumulates into a successful business, you want to do everything in your power to keep it growing, which includes avoiding fraud. Fraudulent activities, like check tampering and payroll larceny, can hurt small businesses in a catastrophic way. 

In order to help you actively monitor and successfully avoid any potentially fraudulent or illegal activity, Bernal Law has put together a guide on the most common types of fraud that affect small businesses. If your business has recently fallen victim to illegal activity, the most proactive decision you can make is to partner with a dedicated attorney and take legal action. 

4 Common Types of Small Business Fraud to Watch Out For

Due to their size, small businesses are more likely to be victim to fraud than larger corporations. They are also disproportionately affected by the losses. To help avoid escalation, here are four common types of business fraud to watch out for:

Workers’ Compensation Fraud

Workers’ compensation insurance is a way for businesses to protect their employees in the case of injury. If someone gets hurt on the job, this compensation is there to help pay medical bills and take care of the associated damages. However, when an employee feigns an injury or is injured off the clock and passes it off as a work-related accident, your small business pays the price. 

In order to best prevent workers’ compensation fraud, be sure to actively monitor the safety of your employees and provide all of the necessary safety equipment necessary for proper working conditions. 

Revenue Skimming

When a customer pays cash for a good or service, employees may commit revenue skimming. This is the practice of not recording the transaction and pocketing the cash instead of adding it to the register. A good way to safeguard your small business from losing valuable goods and money to revenue skimming is to implement a rotating register schedule with highly regulated receipt records. 

Payroll Fraud

Small businesses have an unfortunately high risk of falling victim to payroll fraud, which is the illegal activity of a worker claiming to have worked more hours than they did. Many small businesses still utilize a written timesheet instead of a manual clock-in and clock-out system, which can easily allow employees to fake how many hours they worked. In order to help prevent your company from losing money to payroll fraud, it is important for managers to actively and regularly review timesheets for all staff members. 

Vendor Billing Fraud

Vendor billing fraud is the act of an employee creating a shell company and using business checks from their workplace to pay it. A shell company is a corporation without any active business activity. Vendor billing fraud is similar in idea to check tampering fraud or fraudulent invoicing fraud. 

Red flags to look out for consist of checks written out to cash or a business listing that uses the same address as an employee’s home. 

Fallen Victim to Fraudulent Activity? Consult a Skilled Attorney Now

When an employee or staff member of your small business commits fraud, it is not something to be taken lightly. With the help of a knowledgeable attorney, you can take the necessary steps to right the wrong and get your business back on the right track. For several years, Pedro Bernal, Esq. of Bernal Law worked as a Deputy District Attorney in the San Diego District Attorney’s Office, where he prosecuted complex white-collar crimes, fraud cases, and tried numerous cases to jury verdict.

Don’t suffer the consequences of small business fraud without reaching out to a compassionate attorney for help. For a free consultation today in Spanish or English, please call our office at (619) 736-9092 or use our online contact form

You Might Also Like