A Guide to Fraud Detection and Prevention for Small Businesses

Fraud is one of the most heinous offenses that can be done against a business. Unfortunately, there has been an uptick in the amount of malicious fraudulent actors in the business landscape in the past two years. As reported by PwC in their Global Economic Crime and Fraud Survey 2022, 51% of surveyed organizations have reported that they have been defrauded in the past two years. This has broken every record in the last 20 years of fraud research by PwC. Additionally, if we want to get down to brass tacks and talk money, the Association of Certified Fraud Examiners (ACFE) concluded in their survey titled “Occupational Fraud 2022: A Report To The Nations” that on average, businesses lose 5% of their yearly revenue to fraud.

These numbers absolutely cannot be ignored. Entrepreneurs must take notice of the prevalence of fraudulent actors outside and even potentially inside their business. They should take every step possible to protect their brand from the unfathomable damage that fraud can cause if left unnoticed.

To this end, our experts at Expertise Accelerated have compiled a list of the most prevalent methods and types of business fraud in recent times, along with a quick rundown of fraud countermeasures to keep your business safe and secure. So without further ado, let’s get down to business.

Small Businesses Beware These Common Fraud Tactics


Payroll Fraud

While not necessarily fitting what most of you might imagine as “fraud”; as in the movie idea of an employee siphoning off millions of dollars from a company alone, payroll fraud is by far the most prevalent form of fraud that small businesses need to watch out for, as it is insignificant enough to fly under the radar yet can inflict great damage to the business’ bottom line. According to a 2021 report by Chicago Payroll, small businesses experience payroll fraud at twice the rate of large corporations, which speaks to the insidious nature of this kind of fraud, as it takes advantage of a business’ lack of access to prevention measures and training.

Payroll fraud is when an employee misrepresents their services rendered and time invested in the business’ activities to receive more pay. For example, imagine an employee reporting that they spend 10 hours a day working for the business, but in reality, they spend 2-3 hours doing the bare minimum required while cashing in three times the pay. On top of this, payroll fraud may be happening right in the heart of the payroll department, with the accountant colluding with employees to report more hours and cut bigger salary cheques falsely.

Asset Misappropriation

Speaking of siphoning money out of the business, asset misappropriation is next on the list. Asset misappropriation is an absolute plague to businesses, and one look at the PwC fraud report tells us that no matter what industry your business operates in, malicious internal actors will likely be present and try to take advantage of you.

In case it was not clear, asset misappropriation is basically when your accountant performs transactions from the business’ accounts to their own personal or shell accounts to skim money from the business. Typically, this is done on the down low, with little bits of money going missing from here or there that get written off as rounding errors.. These little bits of missing money over time can amount to millions of dollars in business funds being stolen without upper management being ever the wiser.

Cyber Fraud

In the information age, and especially in the post-Covid-19 business landscape, technology has become the biggest asset the businesses today. Especially for small businesses, technology offers smart and easy alternatives to many sophisticated and expensive resources that larger corporations can muster. But amid all the technological luster of shiny screens, bright lights, and colorful buttons, entrepreneurs must beware of the other side of the coin. Technology while solving a ridiculous number of business problems brings with it a whole new set of problems that you must be informed about, namely: cyber-attacks.

Cyber-attacks are the most prevalent form of fraud we see today. All of us, even those of us who have never  had a job, can relate to opening our inbox and finding a message from our boss, a colleague, or even a friend, prompting us to open a link or document. This, dear readers, is cyber fraud.

From fraudulent messages claiming to be someone familiar to imposter organizations alerting us of some problem to solve with a click on a link, cybercriminals have tried every trick in the book to make us trip up and succumb to their malicious intentions. Cyber-attacks are the most devastating form of fraud, as the penalties for such fraud can range from massive financial decline to even jail time for negligence. Incidentally, experts at EA recently did an in-depth look into cyber-attacks and cyber risk management; a truly illuminating read on the state of cyber-attacks and prevention that can save you millions.

Investment Fraud

Another common type of business fraud is an investment scam. Most of us have heard the story; of an entrepreneur who happens to run into an individual or organization that makes an incredibly tempting investment offer, which the entrepreneur accepts at face value because it presents little to no risk and high returns. Then lo and behold, a week later the entity is nowhere to be found and you are now permanently left with lighter pockets and a financially crippled business.

Investment fraud, like payroll fraud, is incredibly insidious in how it takes advantage of novice entrepreneurs and business owners to steal their hard-earned money. Unfortunately, there is usually little to no recourse when it comes to such scams, as they make you sign agreements that they know you are not informed on enough about to competently sign and cannot afford the legal counsel to help you.

Best Fraud Countermeasures for Small Businesses

Access Control

One of the major reasons why fraudulent actors can get away with their criminal actions is that small businesses are much laxer regarding access control and auditing. The absolute best way to curb internal fraud is to have everything locked down and access limited to the select few who need it, and only to the extent required. By limiting access to business information, you are providing employees with fragments of the whole picture, and stopping them from exceeding their boundaries and stealing valuable business data.

Regular Internal Auditing

Similarly, conducting regular audits of the business’ finances, as well as auditing each individual business process and workflow can be a major deterrent towards fraud. By consistently re-evaluating your business’ internal workings, you will be much more likely to catch any fraud happening promptly, and nip the problem in the bud before it can snowball into a scandal.

Technological Literacy

One of the leading reasons for the success of cyber fraud is that most employees simply are not tech- savvy enough to spot when they are being duped. Scammers have been honing and cultivating their scam tactics for decades , and some of the more recent scam attempts have become almost impossible to spot even for seasoned veterans. This is partly due to the rise of AI, which makes it so scammers can now generate incredibly sophisticated messages that sound authentic and  catch you off guard.

By introducing your business’ staff to cyber security experts, who can educate them on cyber security and risk management, you can drastically lower the chances of anyone falling prey to cybersecurity scams.

Outsourcing and Staff Augmentation

Of course, while it is easy to suggest all of these countermeasures, the truth remains that they come at a cost; that many small businesses cannot pay. Luckily, this cost issue is a thing of the past thanks to outsourcing and staff augmentation.

The fundamental problem for small businesses regarding fraud is the lack of internal controls and infrastructure to monitor the business. Outsourcing and staff augmentation completely solve this issue by providing businesses with robust infrastructure, strict internal controls and offshore, remote talent.

Take Expertise Accelerated’s staff augmentation services for example. At EA, we offer US businesses a range of business staff augmentation support, from accounting and finance professionals to supply chain talent. And with all of this outsourced talent comes EA’s  infrastructure and internal controls to oversee the outsourced business functions. As a result, we guarantee that under our watchful eye, your outsourced business functions will be free of any internal fraud, while our technologically literate staff will be at minimum risk of falling prey to external business fraud attempts.

By leveraging outsourcing and staff augmentations, small business entrepreneurs can make up for their lack of infrastructure and internal controls without emptying their pockets. To put it bluntly, it is the perfect countermeasure against fraud for small businesses.


To summarize, fraud is a growing pain across the business landscape, and small businesses are the most vulnerable to fraudulent actors. This short guide to the types of business fraud you will eventually run into while running a business is by no means an exhaustive list, and newer and craftier methods of fraud will undoubtedly surface as we progress forward. Still, this article covers the most relevant and damaging fraud tactics you can come across, as well as some generally helpful countermeasures against fraud for small businesses, and can prove to be a great informative asset for any inquisitive minds out there.