Small Business Fraud is on the Rise: Are You at Risk?

By Chris Austin, President of Ardiah

Let’s talk about something that keeps small business owners up at night—fraud. You might think fraud only happens to big corporations, where some guy in a fancy suit skims millions off the top before jetting off to the Bahamas. But the truth? Small businesses are more at risk for fraud than large corporations, and it’s often an inside job.

In fact, according to the Association of Certified Fraud Examiners (ACFE), small businesses (those with fewer than 100 employees) suffer the highest median losses—$150,000 per case! Worse? Most fraud goes undetected for about 18 months before anyone even notices. If that doesn’t make you want to double-check your books, I don’t know what will.

So, let’s break down the major types of fraud hitting small businesses and how you can stop yourself from becoming the next cautionary tale.

1. Accounting Fraud: Cooking the Books & Fake Expenses

Let’s start with a scary stat: Nearly 30% of all small business fraud cases involve financial statement fraud. That means someone in your business is tweaking the numbers to make things look better (or worse) than they actually are.

Some common accounting scams include:

• Fake invoices (employees creating invoices for fake vendors and cashing the checks themselves).
• Skimming off customer payments (if you still take a lot of cash, you’re a prime target).
• Fudging expense reports (that ‘client lunch’ was actually someone’s weekend getaway).

How to prevent it:
✅ Use cloud-based accounting software with multi-user access.
✅ Require dual approvals for financial transactions.
✅ Outsource bookkeeping and accounting—a third-party firm like Ardiah acts as an extra layer of oversight (and we don’t take vacations on your dime).

2. Payroll Fraud: Ghost Employees & Buddy Punching

Payroll fraud is one of the most common (and costly) types of small business fraud. Why? Because payroll happens regularly, and it’s easy to slip a little extra in if no one’s watching.

Some common schemes:

• Ghost employees – Payroll includes fake employees whose paychecks are being cashed by a dishonest worker.
• Overtime padding – Employees clock in early or stay late “off the books” and manipulate their hours.
• Buddy punching – A friend clocks in for someone who isn’t actually working (a major problem for businesses without biometric or digital time tracking).

How to prevent it:
✅ Use an automated payroll system with fraud detection alerts.
✅ Require direct deposit—paper checks are easier to manipulate.
✅ Outsource payroll to a professional provider like Ardiah—so you don’t have to spend hours digging through suspicious timesheets.

3. Payment Fraud: Cash is King… for Thieves

Still using an old-school cash register? Bad news. Small businesses that rely on cash transactions are at a much higher risk of theft. Employees pocketing small amounts at a time might not seem like a big deal—until you realize you’re missing thousands of dollars over the course of a year.

Other common payment fraud schemes include:

• Refund scams – Employees process fake returns and keep the money.
• Credit card skimming – A dishonest worker uses customer payment info for personal gain.
• Cash skimming – A worker takes cash from sales and never records the transaction.

How to prevent it:
✅ Upgrade to a Point of Sale (POS) system—cash registers are outdated, and modern POS systems track every transaction digitally.
✅ Use secure payment processors with fraud detection features.
✅ Reconcile daily sales and deposits—if money is missing, you’ll catch it fast.

How Outsourcing Can Save You from a Fraud Nightmare

Here’s the hard truth: Most small business owners don’t have time to police every dollar, invoice, and paycheck. That’s where outsourcing comes in. Having a trusted third party manage your accounting, payroll, and payment processing gives you built-in checks and balances.

At Ardiah, we:
✅ Run payroll with full compliance – No fake employees, no “oops, I forgot taxes,” just accurate, fraud-proof payroll.
✅ Handle bookkeeping and financial reporting – With third-party oversight, we can spot shady transactions before they become a crisis.
✅ Set up secure payment solutions – POS systems, digital payment processors, and fraud detection tools that make cash theft nearly impossible.

Think of outsourcing like hiring a security guard for your money—except we don’t carry flashlights or walk around looking suspicious. (Okay, maybe sometimes, but only when we see a QuickBooks disaster.)

Final Thought: Fraud Happens When No One’s Looking

If your fraud prevention strategy is just “trusting your team”—well, let’s just say hope is not a great business plan. The reality is, even the best employees can make bad choices when temptation is too easy.

Outsourcing payroll, accounting, and payments isn’t just about making life easier—it’s about protecting your business from fraud before it happens.

So, if you’re still relying on paper checks, handwritten ledgers, and the honor system to manage your money, let’s talk. Ardiah can help you tighten up your financial security—so you can focus on growing your business, not hunting down missing dollars.

📞 Let’s chat before someone in your business takes a little too much “initiative.”

👉 Schedule a free consultation today! 207-230-4576 or [email protected]