Why $10M to $30M Companies Are Vulnerable to Fraud And How to Prevent It
Ben Hackley
Fractional CFO - For SMBs looking to grow cash flow x3 times, freeing up funds for growth!
by Ben Hackley , seasoned fractional CFO for SMEs
In the $10M to $30M annual revenue range, companies are particularly susceptible to fraud. This revenue bracket presents a sweet spot for fraudsters due to several reasons:
1. Worthwhile Theft Amounts: At this size, the amounts that can be stolen are significant enough to be enticing but not so large that they automatically trigger thorough audits or investigations.
2. Lack of Robust Financial Controls: Many companies in this revenue range haven't yet implemented the stringent financial controls and oversight mechanisms that larger corporations have, making it easier for fraud to occur unnoticed.
3. Limited Resources for Monitoring: These companies often lack dedicated resources such as internal auditors or comprehensive fraud detection systems. The focus is typically on growth and operational efficiency rather than on rigorous internal controls.
4. Under-the-Radar Operations: Fraudulent activities can fly under the radar because these businesses are large enough to have complex financial transactions but not large enough to attract significant regulatory scrutiny.
Steps to Prevent Fraud in Mid-Sized Companies
1. Implement Strong Internal Controls
- Segregation of Duties: Ensure that no single individual has control over all aspects of any significant financial transaction.
- Regular Audits: Conduct regular internal and external audits to detect and prevent fraud.
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2. Use Technology
- Fraud Detection Software: Utilize software that can detect unusual patterns and anomalies in financial transactions.
- Data Analytics: Employ data analytics to monitor financial activities in real time.
3. Create a Fraud-Aware Culture
- Training Programs: Provide regular training to employees on recognizing and reporting fraud.
- Whistleblower Policies: Establish clear policies that protect and encourage employees to report suspicious activities.
4. Monitor Lifestyle Changes
- Background Checks: Conduct thorough background checks on employees, especially those in key financial roles.
- Lifestyle Monitoring: Be alert to sudden, unexplained changes in employee lifestyles that might indicate fraudulent activity.
5. Conduct Risk Assessments
- Regular Reviews: Periodically review and assess the effectiveness of your internal controls and fraud prevention measures.
- Update Procedures: Continually update your fraud prevention strategies to address new and evolving threats.
I don't care if it's $1 or $Million, never allow someone to steal from your business. Be intolerant.
The Entrepreneur's Coach | Helping every Entrepreneur - CEO become accountable & focused on growth | CEO @ Commit Training
5 个月You would hope this wouldn't be the case but my... how often it seems to happen!
Author of "CFO to Fractional CFO: The Only Guide You'll Need To Launch Your Business & Leave Corporate" / Social Media Manager (LinkedIn)
5 个月Such a common issue, yet very little talked about. It's almost considered part of the business. Uh, No, it ain't. Stealing is stealing.
Preserving the Heart of the SBA by Protecting the Guarantee
5 个月Another small local restaurant, Ben Hackley, shut down abruptly due to internal fraud. Back in the day, when I was a commercial loan portfolio manager, it seemed that once a quarter, a business owner was drowning in internal fraud losses of some sort. I used to recommend and teach business owners what to implement to protect their businesses. As the old saying goes, you can lead a horse to water, but you can't make it drink.
Entrepreneurial Leader & Cybersecurity Strategist
5 个月Implementing strong internal controls, leveraging technology for fraud detection, fostering a fraud-aware culture, monitoring lifestyle changes, and conducting regular risk assessments are all key steps in safeguarding against fraudulent activities
Your insights into fraud vulnerability among mid-sized companies are incredibly valuable. The factors contributing to susceptibility in the $10M to $30M revenue range are crucial to understand for effective prevention strategies