How To Prevent Small Business Frauds?

Friday, 29 Apr 2022

Small businesses are built on mutual trust and loyalty towards the organisation. However, it does not protect them from employee fraud and embezzlement. Many small and medium-sized entities in Melbourne face challenges like unrecorded expenses and cashing of unauthorised cheques from deceitful staff members.

It is often hard to detect fraud because business owners do not pay attention to its prevention. Thus, expert bookkeepers Melbourne emphasise mitigating the risk of scams that can severely impact the financial health of the business.

Small organisations are more vulnerable to such thefts because employees know all the sensitive information and are trusted blindly. Let us understand how these frauds can be prevented to keep the organisation protected.

1. Hire A Bookkeeper

Small businesses in Melbourne usually ask their employees to take charge of the accounting duties. The chores are spread among various workers, such as one person is responsible for tracking the receivables and following up with customers while another staff member looks after invoicing.

The accounting and recordkeeping process can become chaotic and mismanaged when too many people are involved. It can lead to errors and missed entries. Thus, small business owners must hire a professional bookkeeper who can singlehandedly manage the books and all the related accounting activities.

It ensures the centralisation of all the financial information and streamlining of all the accounting processes. However, the handling of cash can be delegated to someone from the senior management or the CFO to ensure complete transparency and safety.

2. Building A Security Wall

Besides using a cybersecurity system to keep the data safeguarded from cyber theft, businesses in Melbourne need to implement internal controls to avoid fraudulent activities. These restrictions must prohibit employees from accessing confidential financial information, inventory or accounts.

The accounting software and cybersecurity firewalls must allow only the authorised users to access financial data. All the employees must be trained in the ethical use of company data. They must use strong passwords, anti-virus and avoid clicking suspicious emails and links. They should know what falls under theft or breach of data to prevent accidental violations of the security policies.

3. Track the Business Bank Account

While a fraudster can manipulate paper-based bank statements, it is not possible to mess up with online bank statements. Also, online banking allows the business owner to check the incomings and outgoings and ensure that they match with the records. Usually, bookkeepers follow bank reconciliation for this purpose.

It is essential to look for debits made by unrecognised accounts or missing cheques. Tracking the bank accounts closely aids in preventing frauds as the bank does not make a mistake with the incomings and outgoings.

Thus, if there is any discrepancy in the data or any obscure transaction, the fraud can be identified. When employees know that the bookkeeper and the owner are checking the bank account, it will deter them from swindling.   

4. Take Advantage of Audits

Ask your bookkeeper to conduct routine audits of high-risk areas, such as payroll, inventory, accounts payable, accounts receivable, cash transactions etc. Sometimes, the audits must be done without any prior intimation to catch the fraudster off-guard. It is also useful in creating a deterrent among scheming employees.      

Thus, the bookkeeper must track all the petty cash transactions, refunds, product returns and other such activities that can make the scamsters take advantage of the situation and cheat the business in Melbourne.

5. Work With Approved Suppliers

The bookkeeper must ensure that the business gets its stock from reliable suppliers and vendors in Melbourne. For this purpose, they must check their history and speak to other businesses that partner with them. The bookkeeper and the business owner must visit their storage or facility and negotiate terms personally to build a rapport.

Once they are satisfied with the establishment, they must go ahead with the partnership. It can help in avoiding frauds, such as billing scams and fake invoices. Some fraudulent vendors may use another established vendor’s name and address to close the deal. Thus, it is essential to do a thorough background check before signing the contract.

6. Make Secure Payments

Small businesses in Melbourne should have separate business accounts and personal accounts. It is the responsibility of the bookkeeper to never allow the business owner to use his personal account for business transactions. It can cause recordkeeping errors and make it challenging to segregate business expenses during the tax season.

A separate business account makes sure that you can easily identify frauds. Also, the business owner must be encouraged to make secure payments online rather than paying cash to stay away from scams. In addition, they must keep their business credit card details protected to safeguard the business capital.

7. Hire Your Employees Carefully

The business owner in Melbourne must work on developing a hiring routine that involves screening the employee’s past record. It must include cross-checking their claims with the references and past employers.

If they are being hired for the accounts department, they must be thoroughly interviewed by the bookkeeper and informed about the fraud policy to make them aware of the repercussions of any wrongful action.

Also, the existing employees must be informed about the ways of recognising frauds or suspicious activities in their teams to prevent scams. They must be made responsible for the protection of the business information to maintain a healthy work environment.


Small business frauds are becoming common because entrepreneurs do not anticipate deceit from their employees. Thus, bookkeepers in Melbourne need to be extra vigilant about the use and management of financial information.

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