Protecting Your Business From Fraud

Business fraud is on the rise, and thanks to the high volume of transactions, cash handling, and inventory needs, restaurants, hotels, and other hospitality industries are especially vulnerable.

Want to keep your business safe from costly deceptions? Check out our guide on common fraud schemes and how to stop them.

Common Fraud Schemes

While any business can be a target, the hospitality industry faces unique fraud risks, what with its fast-paced environment and high employee turnover. Here are a few of the most common fraud schemes to be on the lookout for:

• Fake invoices: From multiple suppliers to seasonal vendors, many businesses partner with other companies or contractors. Fraudsters can exploit these working relationships by submitting counterfeit invoices for products, goods, or services that were never actually provided. With so many invoices being received every week, it’s possible for busy staff members to simply pay the fraudulent invoice without verifying its legitimacy.
• Internal theft: Whether stealing food and alcohol, not reporting tips, or skimming cash, employee theft is another prevalent form of fraud, especially in restaurants and hotels.
• Credit card fraud: The rise of credit card payments has brought with it a surge in credit card fraud. Stolen cards and credit card chargebacks are not uncommon and can lead to significant financial losses for a company, especially small businesses.

How to Protect Your Business From Fraud

Fortunately, there are several steps you can take to help prevent your business from falling victim to fraud.

Implement Strong Internal Controls

Effective internal controls are one of the best ways to safeguard your business, especially if you operate in an industry where large amounts of cash and inventory are handled daily.

Consider giving employees different responsibilities when it comes to placing and receiving orders, as well as approving invoices. Separating such tasks helps prevent one person from having too much control over financial processes.

You may also want to consider routinely reconciling cash drawers and limiting the number of employees with access to said cash. Implementing a robust inventory management system is another step in the right direction, especially for those in the hospitality industry, as it can help immediately identify discrepancies that could signal theft or fraud.

Train Employees

Your staff plays an important role in protecting your business from fraud. Ensure they’re properly trained to recognize signs of fraud, such as unusual credit card transactions and suspicious invoices.

If you have seasonal employees or experience high turnover that can create vulnerabilities, consider implementing regular training sessions that keep all staff informed.

Utilize Available Technologies

From point-of-sale systems that monitor transactions to cybersecurity measures like multi-factor authentication, there are a number of technologies businesses can leverage to help protect against fraud. Explore the different firewalls and security measures your business can benefit from that will provide an additional layer of security.

Create a Whistleblower Policy

One of the best ways to deter fraud is by giving employees a safe way to report suspicious fraudulent activity. A whistleblower policy offers clear guidelines for reporting issues without fear of retaliation. You may want to consider setting up anonymous reporting channels so staff can report activity confidentially.

Protect Against Fraud With Prosperity ABCS

Learn more about our comprehensive, in-depth approach to your financials and how our expertise can protect your profits, reputation, and long-term success. Connect with our Prosperity ABCS team today!