Starting a new business is the pinnacle of many aspiring entrepreneurs' dreams. It can take years of planning to find the right opportunity. When it happens the feeling of achievement can be very strong. Why then do most new business owners choose to ignore the risk of fraud at this early stage?
Fraud is a business risk. Problems with locating customers and seeking suppliers of goods are business risks that the new venture will have to face. Sub standard performance or even business failure can result from problems concerning the latter, with similar results from the work of the fraudster.
When a business is struggling to find its feet, it can be vulnerable to a number of different frauds. In particular, in its enthusiasm to find new sales, it may sell to customers on credit who have no intention of paying or at best are having their own financial problems and are close to failure themselves.
Another favourite fraud is the sale of goods that will have no commercial worth to the business, usually by hard selling techniques over the telephone. Fraudulent charity publishers are in this category and will try to solicit funds for worthless adverts in a desk diary or wall planner from the new business for some spurious good cause. Very little if any money goes to a charity and the publications will not be circulated to good effect. Most of the revenue usually finds its way to the crooks pockets.
Fraud prevention controls in a business are very cost efficient. You do not usually have to spend any significant money but you must take some time from your busy schedule to consider the risk. Fraud strikes at the complacent attitudes of those that allow it to thrive. The National Fraud Authority estimates the economic cost of fraud in the UK to be £30 billion every year. Much of this - and a great deal more that may never come to light - is fraud found in small new businesses. If the owner manager takes some time to simply think about where losses might occur, the chances are that he will prevent those losses from ever taking place.
The managers of new business start ups are often financially naive to begin with. With the best intentions to make a success they may not be ready for the financial burden of running their business. Chances are that they were excellent at the technical aspects of their professions, even good at selling their trade, but managing finances may have to be learned afresh.
As a result, it is worth while spending some time considering a fraud prevention plan when starting a new venture. This need only be a few sides of paper that sets out the key areas of risk and what the owner thinks he needs to do to avoid losses. A lot of fraud will be prevented by this exercise and also the new proprietor will get a much better overall grip on his new venture.
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