When running a business, there can be many potential financial pitfalls. Whether it’s issues with tax, wages or just the constant battle to keep the company thriving. However, nothing is quite as serious as fraud. Fraud can come from a number of different sources, whether from customers, employees or suppliers. But what happens when the fraud is from a fellow business partner? Unfortunately, business partner fraud does happen and can be destructive to the company. Therefore, what can you do to protect against potential business partner fraud and what happens, should the worst happen?
Choosing the right person to go into business with would be the obvious suggestion to protect against fraud. Whilst it’s easy to suggest this, in practicality, you can’t always predict how a business partner will act. Even those who feel personally close to their partner can be blindsided by acts of fraud. Therefore, trust is key but it’s also important to remain vigilant with all aspects of the business.
Knowledge
One of the best ways in which to guard against potential business fraud is to ensure that you know everything about your business. Understanding how your company works; particularly all of the different financial moving parts, makes it much easier to spot when something is different. It’s very easy for fraud to go unnoticed, particularly if it involves small transactions or a part of the business that is overlooked. It’s only with a full working knowledge of your business that you can remain vigilant.
Remain Sceptical
Running a business can require enthusiasm, drive and a positive outlook but this doesn’t mean naivety- healthy scepticism is recommended. Whether it’s a cheaper supplier, new investor or even just a large order, it’s important ensure every potential deal is above board. It’s these sorts of transactions in which fraud can and does take place.
Money Out
When we talk about fraud specifically linked with a business partner, these are particular areas in which this is most likely to happen. Namely, tax fraud and generally unlawful removal of money out of the business. Therefore, keeping a watchful eye over all outgoing transactions is paramount. If you see financial figures that don’t make sense, query it. If you don’t get a satisfactory answer, then look into the numbers yourself. Remember, fraud happens when nobody is watching.
Make a Plan
Nobody wants to anticipate that their company will play victim to fraud, particularly not from a fellow business partner. However, creating an action plan ahead of time is a good way to protect against this eventuality. A plan that prioritises financial visibility and openness can foster a much healthier business environment. It’s checks and balances such as these which can both prevent fraud and identify problematic issues before they become a larger problem.
Post Fraud
Even with all of the safeguards in place, fraud can happen- so what happens next? When it comes to fraud committed by a business partner, the potential damage to the business can be great but there are ways in which you can attempt to mitigate this.
As soon as you become suspicious of potential fraud, it’s important to get expert advice immediately. Not only does this ensure that you are actively working to stop any illegal activity, but it also means you can protect yourself from suspicion.
It’s also important to keep thorough records on all financial aspects of the business. These records can provide key evidence, should you need to escalate the situation.
Should the business remain viable, a thorough investigation will need to be carried out. This helps to identify how and where the fraud has taken place and which parts of the company have been affected.
Fraud, particularly fraud carried out by a business partner can be jarring to say the least. When we consider that this can often lead to legal proceedings or even arrests, it’s imperative that you act appropriately. It’s for this reason why many business owners choose to employ a financial expert, who can offer the best advice possible. The team at Salhan Accountants have a wealth of knowledge in this area and can offer professional financial advice and services.
