Know About the Types of Frauds in Business
Business fraud can have a big impact on any company regardless of its size. If you are a business owner, then you may have heard about the types of frauds in business and these may sometimes seem unavoidable. Especially, sensitive accounting information can give any business owner sleepless nights. Handing over the accounting information to unknown 3rd party sources can pose a serious threat of exposing business secrets. However, not all 3rd party sources are a threat but it is quite hard for an entrepreneur to have a balanced attitude toward them. Business frauds are just a kind of virus that has to be removed from its roots to eliminate frauds completely. What is a Business Fraud? A business fraud simply refers to the crimes committed by high-ranking or senior employees in a business. It involves someone stealing valuable financial information from someone else under the disguise of dealings in business. Types of Frauds in Business According to a survey conducted by ACFE, small business fraud is more common. Most small -businesses are impacted by frauds when compared to large businesses. Whether customers or employees, these are only a few who may take advantage of your business. The point is to recognize the fraud and take steps to protect yourself. Let us take a look at some of the types of frauds in business that you can face: 1. Identity Theft This is one of the most complex and biggest frauds in business. It is because a business can either be a victim or a perpetrator. In this fraud, someone steals your personal information from a party and uses their information to do fraudulent activities like stealing. Expert fraudsters use this information to open a new line of credit and make purchases with their credit cards, thereby committing crimes under false identities. As for a business, it can commit this theft by stealing bank account information. Moreover, employees having sensitive data may use it to steal from other businesses. There can be many scenarios, which is why it is essential to protect your cyber ecosystem. Always use encrypted personal data and keep up with your virus updations. 2. Asset Misappropriation This kind of fraud is quite common and is very easy to commit. Asset misappropriation simply means stealing from an employer deliberately. Now let us discuss about a couple of its categories: Cash Misappropriation – Committing theft of stealing money from the employer, whether it is transferring funds from the firm’s bank account or directly taking money from the safe comes in the cash misappropriation category. Non-Cash Misappropriation – This type of theft comes under stealing of non-cash assets from the firm. It could include stealing office inventory and equipment without being authorized. In order to prevent asset misappropriation, you should log or record the financials including detailed inventory and prove any losses. Another step that you can take is to partner with your bank so as to negate any unauthorized transactions. In addition to that, you must have a talk with your bank regarding the different programs that fully safeguard your business from such incidents. 3. Corruption Another one in this business frauds list includes “Corruption”. It is basically a blanket term for a plethora of frauds. This fraud usually happens when someone in a position of power in a business deliberately engages in a dubious/dishonest behavior, or even mishandles funds, then it comes under corruption. Some most common examples include- laundering money, taking bribes, carrying out unreported transactions, etc. There have been instances where business owners themselves become corrupt when seeking more money without even thinking about its consequences. However, such incidences are quite rare but happen. Therefore, any business employee should be observant all the time. You must report business fraud so that it gets investigated thoroughly by the IRS. 4. Payroll Fraud One of the most common schemes in businesses as opposed to high-scale companies is the Payroll. You can find several ways by which payroll frauds can happen. In most companies, employees ask for advance payments without having any intention to pay back, or they simply lie about their working hours. Moreover, they could clock in their colleagues in case they are absent or haven’t done their work. In addition to this, you can also conduct background checks on the employees before hiring. Auditing payroll accounts can be highly beneficial so that you can identify and catch any fraudulent behavior sooner. You could also hire the best payroll service providers before paying employees, thereby keeping track of their hours within your system. It is always better to be proactive beforehand so as to avoid any mishap at your workplace. 5. Financial Statement Fraud There are many different reasons when a business owner or an employee may commit financial statement fraud. This mostly includes the manipulation of financial records in order to make their net worth or assets seem greater than they really are. Moreover, there is a chance that they can show fake losses or debts. However, this type of fraudulent activity is typically carried out for the purposes of securing loans. At other times, the employee seeks loans just to steal the money. Whatever be the case, this type of fraud in business is quite serious. Therefore, you should pay attention to any activity that seems dubious or suspicious and react instantly without waiting. Additionally, you must look out for any suspicious email or network activity and immediately seek help to remove any systems that may have been compromised as a result. 6. Return Fraud Any business that is into selling goods must’ve experienced return fraud at some point. Return frauds can be of different types. There are instances when a customer purchases a product, uses it, and then returns it even if it works fine and has no manufacturing defect. Or there are other fraudulent activities in which the products are stolen from you and then attempted to return them so as to make a profit. It may be difficult to completely clear out return
Cash Flow Management—What You Need to Know
Cash flow management is the most vital, but most ignored financial tool available to businesses. In-fact, many business owners confuse cash flow management with accounting. But the rules of accounting define when those transactions are recorded in their financial statement. This is of no help when business owners need to manage their cash for the upcoming week or month. Many businesses fail because they run out of cash, even when their statements show profitability. What Exactly is Cash Flow Management? It is simply the tracking of money that comes in and out of a business. Moreover, it is a process of analyzing as well as optimizing the net cash receipts minus the expenditure. After-all, it is all about the management of your finances effectively so that there is enough cash to grow. With the best cash flow management strategies, you will be able to predict how much money will be available so as to cover vendor invoices, payroll etc. Now let us talk about cash flow strategies- Cash Flow From Operations Usually the operational cash flows from day to day operations such as sales and production. This figure determines whether a firm has enough money coming into paying operational expenditure and bills. In order to have a long term viability, there should be more operating cash inflows. Cash Flows From Investments CFI shows how much money has been spent or made from any investment in a period of time. Cash Flow From Financing A CFF shows the net flow of cash that is utilized to fund the business. The activity includes transactions that involve the issuance of equities, debt, or paying dividends. Moreover, it also provides the investors an insight into a firm’s cash position including how their capital structure is being managed. How to Manage Cash Flow in Business? The financial statements are necessary to manage your firm and if you have been regularly monitoring your funds, then managing cash flow will become less cumbersome. By Choosing the Right Payroll Cycle You can properly structure your payroll to mesh with your income and complying with wage laws. In case you are generating daily revenue, then covering the cash needed would be much easier for weekly payroll. However, this can be quite a challenge for those with comparatively slow revenue streams. There can be some advantage to holding cash so as to pay less frequently, provided you fall into the applicable wage law. Using Technology for Payments Next on how to manage cash flow is opting for online payments in order to collect receivables faster. Moreover, the use of EFT (Electronic Fund Transfers) to pay bills would make the process much easier. This will surely help you keep track of where you are currently standing. Whether it is the short or long term financial success, positive cash flow is vital. You can make the most of your cash by properly collecting payments, monitoring expenditures and utilizing the resources that make the entire cash flow process convenient. Strategic Bill Payments Another one in the small business cash flow management is to extend payables to spread your payments. It is very important for you to not pay all of your bills at once, because it can drain your cash which in turn will jeopardize your relations with the suppliers. What you should do is sort and review bills that are on priority and pay the important bills such as rent or payroll. For those payments which are more flexible or you can say less important, can be paid later. Additionally, always check for any discounts for paying bills early and prioritize accordingly. Consider Invoice Financing In case you are not able to negotiate or are needing money sooner, than the time you are able to agree upon with your customers, then invoice financing should be considered. It is quite different from the invoice factoring, that you purchase invoices at a certain discount and invoice companies will then advance the entire portion of the remaining invoices and you will repay that money with interest. Make Sure There’s an Emergency Fund Although your business is better, still you should make sure to put some funds aside every month. Doing this will be helpful in the event of potential cash flow problems. You would agree that no one can accurately predict what is going to happen, therefore it can be worth setting aside some emergency amount that would at least cover the bills. Another best thing would be to check your monthly outgoings and accordingly save around 3 to 4 months worth. It may not seem to be a complete solution, but should cover a few major cash flow issues for the time being. Use the Best Cash Flow Tracking Tools Using the most effective tools like a cash flow management software will help you keep track of your financial performance. It may sound a bit complicated, but using an intelligent software can actually come in handy. Moreover, you can also find a plethora of applications that enable you to manage bookkeeping with ease. The point is to choose a means to make your work as easy as possible. Avoid Too Much Leniency With Your Customers You should be fair to your customers without being pushy. A smart invoicing strategy will get the job done, but don’t be hesitant to take a formal action if there is a need. Keep a keen eye on your ARs turnovers too. If it is boosting up, then step up your efforts at getting payments. As the age of the receivables increases, their overall quality also goes down, therefore quick action is required. Always Keep your Business & Personal Finances Separate Next in this list of how to manage cash flow is to understand your cash flow and anticipate how it may change. You should never mix personal finances and business as it may leave you uncertain about the overall performance of your business. Always keep them separated as in this way you will know how much cash your