Wednesday, March 25, 2015

Fraud in Small Businesses

Small business fraud is common yet not understood well. This is not small businesses committing fraud, I am talking about small businesses being the victims of fraud. Its hard for small businesses to recover from fraud, many owners simply don't have the resources (i.e. cash flow) to recover and those who do find it extremely difficult to regain the trust and confidence of customers. Recently I read an article by Dr. Bonita Kramer in the Journal of Small Business and Enterprise development (find the article here) in which she explains the fraud triangle: unsharable pressure, perceived opportunity and rationalization. The triangle is in relation to the pressure employees are subject to and how that pressure leads to some committing fraud. The main point is this, the best way to avoid fraud is to make clear to employees that fraud will be detected. The best way to detect fraud is to be actively involved in the management of your small business and have proper internal controls, don't place employees in a position where temptation to commit fraud is too great!

What are your thoughts on the fraud triangle?

Tuesday, January 13, 2015

Limited Strategic Potential for Small Businesses?

I read an article in a journal today (find link here) that focused on the challenges of small businesses in making strategic decisions. The author states that small independent businesses are limited, contrary to big business, in how strategic they can be in making decisions. They can basically select a strategy of growth, retention or harvesting (reducing business functions that lose money) while big businesses can do all three.

What was interesting to me is that the author presented two different ways of making decisions. By time (long, medium and short term) and by importance (strategic, operational and tactical) Now I have been part of an organization that tends to use the second way to classify decisions for almost 15 years, however once classified as such they are immediately arranged from long to short range time frame decisions. I don't see why the two ways should be exclusive.

Do small business owners have as much time to think strategically as big business CEOs? I think that's the more pressing question. If time permitted they probably would but with multiple functions and a very short staff to carry all the tasks needed most small business owners don't. A "break" even for a day or two to think about the business, where it is and where it’s going, is essential.