Avoiding Fraud In Your Business by Pierre DeBois (TEW3 co-author)

Avoiding Fraud In Your Business by Pierre DeBois (TEW3 co-author)

Many times small businesses struggle with fraud but never talk openly about its impact.


Featured Co-Author, Pierre DeBois (row 2, image 2)

If you are an entrepreneur reading this, you have to admit being taken advantage of is a difficult subject to talk about when everyday it seems every business owner speaks of passion,  striving to grow their enterprise through a never-yielding passion supported with a positive attitude.

The idea that you must be passionate to grow your business is essential. Even Steve Jobs recognized the value of passion end of the session he had with Bill Gates and a Wall Street Journal panel. He mentioned that password is important because you have to be insane to stick with all the ups and downs I can come from running a business. A significant “down” that can happen is encountering a fraudulent customer or, worse, a fraudulent partner.

I mentioned this as a part of chaos in my chapter for the book TEW3 (Chapter 6: From the Chaos of a Startup To The Calm of A Profit) but I didn’t delve into some details. This post will explain some of that detail , and hopefully help you understand what you need to do to minimize fraud to your best of your abilities.

I can speak from experience because of a unique gift with analytics – metrics have to tie back to marketing strategy, which then connects with what is being offered. This means having to know if a business operates with integrity or if there are serious concerns.  Not all problems means that there is fraud, but certain problems should not be ongoing. A business that has no cloud-services to invoice customers may be fine the first year, but it is extremely telling when it is the same situation in its 13th year of operation (I’ve encountered that; The business no longer exists).

The first thing to keep in mind is that fraud WILL happen. You have to expect it; It’s just a question of when. Fraud usually happens in a situation in which people are not working systematically.  If you are a solopreneur, you’ll encounter some folks who will try to get over by asking for endless favors. In retail, some people will try to steal inventory when there is no tracking system to protect products.   Without a tracking systems, the degree of fraud becomes a slippery slope. One favor becomes many; One product becomes more.

In my chapter for TEW3 I noted a couple of examples of tracking whether it through accounting or even through analytics . I recall helping a potential client discover that their website did not have the analytics have installed as described. The unscrupulous vendor kept telling them that they had data and metrics and reports . The client had never review those details and had trusted the vendor to provided entirely.

So here are some simple ideas to keep in mind as you begin to work with clients and partners who work up to standards, not below them.

  1. Be Systematic

So in trying to prevent fraud your best bet is to think about how you can be systematic in your business.  One great way is to vet potential clients that come in. Many starting entrepreneurs try to have everyone and their momma as a customer. The fact is that not every revenue turns into a lifelong customer.  Having a set of structured questions with essential answers will keep directing the right clients and prevent the wrong clients from entering your business.  You can even use those question on your website – Zimana, for example, has a set of standard questions, meant to help small businesses frame their needs.

  1. Put It In Writing and Back Up

Once a customer has framed a need, PIIW – put it in writing.  Make sure that the work supports what both parties agreed to. Project creep may not be fraud intended – some projects, such as app development, can beget other changes that require work.  But auditing how work is completed on a weekly basis will provide a means to make sure no one is straying from the initial intent, preventing fraudulent inclusion of work on DL (that’s down-low for the slang impaired!).

  1. Can The Partner’s Business Model Be Explained Simply?

When addressing partnerships, ask good questions on how they are delivering on their business model and if they are consistent.  A business model is a formal way of just asking how a firm makes money when it services a client.  Everyone can describe what they do; few can describe it briefly to make sense.  One personal rule I keep is that a description should fit within 3-4 sentences what their business model is.  No big pitch, just a simple answer to a main question – what is it that they do that generates money within that business. If they can’t describe it within 3 to 4 sentences or a similar set of response, chances are something is missing. They may not have expertise in marketing their business or an innocent misunderstanding how to present the business in a discussion.  But fraud usually mean involves a poor wish-washy overemphasis on selling without a focus on how to operate. The day of elaborate sales pitches are gone.  Get to the specifics and see how upfront and ethical partners are.

  1. Know where to report fraud

The FTC is a great place to report fraud activity.  There’s a site that explains what consumers can do to avoid fraud.  It’s also a good read for small business owners to know how to handle customer and partner complaints. You can check out the site at https://www.ftccomplaintassistant.gov/Information#crnt&panel1-1.

  1. Watch out for false social media fans and followers

Finally be leery of businesses that have a lot of social media followers on their profiles but no engagement.  Inspect pages and see if there is some level of activity in communicate to others – I mentioned about consistency in advertising in my chapter.  Unfortunately there are a number of services available where businesses can purchase fans and followers to look much more influential. Don’t fall for it.

Always protect your credibility, so you can protect the customers and partners who are ethical and will attract other worthwhile people as well.




[TEW] is a tribute to and a reminder of our community’s commitment to not just inspiring others, but taking actionable steps to turn our dreams, talents, and abilities into fulfilling, successful businesses + helping others along the way.  If looking for a supportive community for entrepreneurs that do even more work than they talk, unleash the entrepreneur within you and join us! #unleashtheBiz

Read More