WHAT IS OCCUPATIONAL FRAUD?
Most owners of small companies trust their staff, and most staff deserve this trust. A small team also means one person often handles the cash, the invoices and the books. A control costs far less than a loss, and you set up the basic ones in an afternoon.
What the research says
The Association of Certified Fraud Examiners published its 2026 report, Occupational Fraud 2026: A Report to the Nations. The report puts the loss at about 5% of revenue a year, and a typical scheme runs for 12 months before anyone notices. Small businesses show the highest median losses of any size group. 43% of cases came to light through tips, and more than half of those tips came from employees. 84% of the fraudsters showed a behavioural red flag first. The report covers 2,402 cases from 143 countries.
Five controls to start with
1. Split the duties. The person who records a sale does not also bank the cash. The person who orders goods does not also approve the supplier invoice. In a team of three, give each step to a different person and keep the last step, approving the bank payment, for yourself.
2. Reconcile the bank every month. Compare the bank statement with the cash book, line by line. The person who does this must not make payments. Download the statement yourself from the bank portal and read the large and unusual items, such as round-sum transfers, new payees and payments to staff outside payroll.
3. Require two people on every payment. In internet banking, set one user to create the payment and a second user to approve. Set a limit above which you approve every payment. Attach the invoice and the purchase order to each payment before approval.
4. Control the supplier list. A fake supplier is a common route for fraud. Only you approve a new supplier or a change of bank account on an existing one. Phone the supplier on a number you already hold before you change bank details.
5. Check by surprise. Count the petty cash without warning. Pick five paid invoices at random each quarter and trace each one to a purchase order and a delivery. Compare the payroll list with the staff you know are working. Ask a person in finance to take two weeks of leave in a row, and have someone else do the work.
Give staff a way to speak
Since tips find more fraud than any other method, tell your team how to reach you privately. Say you will protect the person who reports. Treat every report seriously, even when the amount is small.
Watch for red flags
A staff member who never takes leave, lives well beyond their pay, resists handing over duties or becomes defensive about questions deserves a closer look at their work.
Think about who else checks your books
A small company which meets the audit exemption tests needs no auditor. Nobody outside then reviews your books unless you arrange a review. Ask your accountant for a yearly review of your controls and a sample of transactions.
Keep records for at least 5 years. Complete records let you trace an unusual payment later.
If you suspect fraud, secure bank access and records first, then speak to your accountant and lawyer before you confront anyone.
Want a control check for your company? Send your latest profit figure or your question by WhatsApp to +65 9876 3553 or by email to henry@cschow.com.sg.
Henry Chow
Public Accountant, C S Chow & Co