You know how disheartening a fraudulent payment can be if you have experienced it in your agency. A recent study showed that a typical agency loses close to six percent of its yearly income to fraudsters. Times have changed, so all agencies need to acknowledge the risks of fraud and take necessary action.
Agencies can use fraud deterrence to know the cause of fraud and eliminate it. Fraud deterrence lies in the belief that the fraud occurred in the right condition, not by accident.
Financial loss is the main effect of fraud in any agency. It is hard to track where every penny goes in a business because businesses have become more complex. Investors avoid brands that deal with frauds because they do not trust them.
The tiniest slip downwards can lead to a reduced client number, even though you offer high-quality services. Below is everything you need to know about fraud in a business. If you ever ask yourself what is billing fraud? or What is bot fraud? This guide is for you.
How Frauds Cost Agencies Millions
Frauds cost companies millions yearly, but its effect goes beyond. Fraud fallout ruins an agency’s reputation and breaks clients’ trust in the agency. Fraud is becoming more popular because fraudsters have become more innovative.
Your brand is at risk of many frauds, such as professional fraud and client fraud. The total amount lost to these frauds varies from one agency to another, but it still has the same result – financial loss.
Many duties come with owning and managing a successful agency, but fraud detection does not appear at the top of the list. The agency owners might fail to acknowledge the fraud threat mainly if they have long-term employees. Some known frauds to an agency include:
- Skimming – this is when employees take money from a client but do not record it.
- Billing fraud – creating another brand and sending invoices for non-existing items.
- Check to alter – this is using an agency’s checks to steal outgoing items.
- Corruption – this is taking part in extortion or bribery in exchange for services.
Most frauds are undetected, and they have negative effects on an agency like:
- Ruining the agency’s reputation – news of fraud in your agency will reach many people, and this will tarnish the organization’s name. Remember that a tarnished name means no client dealings, meaning you will lose a lot of money in the process.
- It prevents the agency from attracting sponsors and employees – very few sponsors would want to work with an agency with fraud scandals. You might lose millions in endorsements if you do not prevent a fraudulent attack.
Workers also want a trustworthy work environment, meaning you might fail to attract them.
- Frauds might also make the agency compromise banking covenants. They can also make the company fail to retain its competitive advantage.
How to Prevent Fraudulent Attacks
Private agencies are the main targets for fraud, according to recent research. These agencies can use the following tips to prevent a fraudulent attack:
- Make permanent “footprints” in the financial system
- Question things that look strange to the agency
- Use two unrelated parties whenever there is a money flow in the agency
How Can You Detect and Prevent Fraud?
To prevent fraud in your agency, you first need to have a strong management team that lives by honesty and integrity. Workers should have easy access to resources, and they should blow the whistle whenever they detect any suspicious activity.
A good management team will also prevent fraud by creating a positive working environment. In addition, they will staff the important departments with the right employees. Even though fraud is not the main priority in an agency’s development, it is impossible to ignore it, or else you will face dire consequences.
How to Keep Your Agency Free From Frauds
First, it would be best to ensure you manage your funds well, starting with the bank accounts. It would help if you also made sure an individual who is not entangled with disbursements does the bank reconciliation process.
It is also advisable to make sure the bank statement is handled by a person who has not taken part in the agency’s functions.
Frauds make agencies lose millions every year. It would be best if these agencies took the necessary steps to fight fraudulent activities.
Regina Thomas is a Southern California native who spends her time as a freelance writer and loves cooking at home when she can find the time. Regina loves reading, music, hanging with her friends and family along with her Golden Retriever, Sadie. She loves adventure and living every day to the fullest.