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Fraud Awareness in Your Business

Small business owners, including restaurant and bar owners, work hard to ensure their businesses are successful; however, these same businesses are the most common victims of fraud. This results in major revenue losses that no one can afford.

The holiday season is a peak time for fraud to occur. Small businesses are vulnerable because they often lack internal controls to curb the effect of scams. The following measures can help to reduce fraud:

  1. Make employee fraud recognition part of training. Business owners can mitigate the risk of fraud through training and internal controls. Employees should be taught the impact of fraud on the restaurant, what constitutes fraud, the warning signs and how to report suspicious behavior. In the event of fraudulent activities, business owners should have a fraud reporting system in place as employee tips most often uncover occupational fraud.

  1. Implement internal controls. Internal policies and procedures are important to help mitigate the risk of employee restaurant fraud. Internal controls help ensure efficient operations, compliance with laws and regulations, safeguarding of assets and accurate financial reporting. These controls should address the separation of duties, access controls, authorization controls and more.

  1. Conduct background checks. It is also a best practice for restaurant owners to conduct extensive background checks on those who have access to company funds and other resources. Always monitor employee behavior. Look for signs of lifestyle changes, significant debt or credit problems, behavioral changes, refusal to take time away from work or unusual deposit amounts.

Fraud and dishonesty take a toll on restaurants and bars of all sizes. A common fraudulent activity found in businesses is the overpayment scam. This occurs when a customer comes up with a reason to overpay on a bill or invoice using a check. They typically ask that the extra money be wired back to a third party after the check is deposited. Later, the scammer’s original check bounces leaving the business liable for the entire amount.

Other notable scams include fake invoice scams with realistic-looking but falsified invoices for products and services, government agency scams that use the intimidation factor threatening to shut a business down or revoke a specific license if payment is not submitted, and phishing and online scams where cyber scammers try to trick employees into giving up confidential information such as bank account numbers or passwords/login info.

This information is provided as a convenience for informational purposes only. This information does not constitute legal or professional advice. It is provided to assist you in recognizing potential unsafe work problems or conditions and not to establish compliance with any law, rule or regulation.

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