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Scope of Fraud and Its Impact on Small Businesses. What Owners Can Do to Prevent Fraud from Occurring in the First Place

Scope of Fraud and Its Impact on Small Businesses. What Owners Can Do to Prevent Fraud from Occurring in the First Place

Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain.(1) According to a poll by the Association of Certified Examiners on small businesses with less than 100 employees fraudulent activities ranged from employee theft of cash, equipment, merchandise, inventory, and even data. Fraud schemes ranged from such things as billing, check tampering, skimming, expense reimbursement, corruption, physical theft, cash larceny, fraudulent financial statements, and register disbursements.(2) As you can see there are many ways in which fraud can be committed within a business. Fraud can hurt small businesses to a larger extent simply based on the fact that small businesses have much more to lose. They can’t afford the negative publicity of a corruption scandal because they may only have a couple of clients that do most of their business and if news spreads it may permanently scar the small business. Losing trust from clients is one sure way to not only lose their business but lose your credibility within your market. Larger companies can handle the downswings and micromanage fraud cases better perhaps. One reason why small businesses are affected to a greater extent than larger businesses is because as a small business they don’t have the amount of systems in place to flag fraud. Many larger organizations have check and balance systems that allow people to overlook others work. In a corporate climate this ability to afford workers for oversight work is often a leisure of corporate business but small businesses are often running pretty tight and it is usually up to the owners to catch it. There is however some tips and tricks to spot potential fraud. First you should know that fraud happens at all times whether the economy is good or bad. According to Chris Barr who has thirty-three years of experience as an operational risk underwriter in corporate insurance against internal fraud; “Most frauds are perpetrated during economic booms, when greed reigns. Money is plentiful and it flows freely. These frauds are discovered when economic activity drops, revealing the previously obscured shortages. The frauds cited tended to commence two or three years before they blew up. And business owners seemed to cite closer scrutiny of cash flows as the cash dwindled. The distinction is often critical to the insurance. The crime loss occurrences that do tend to spike during...

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Why Large Firms are Slow to Change

Why Large Firms are Slow to Change

I think that large firms are so slow to change because of the sheer size. In the physical world the larger an object, the more massive an object, the greater the force needed to overcome frictional force, the force required to get an object moving. Once you overcome that frictional force it generally takes less force to keep the object moving. If you imagine that a company with few employees is better able to incorporate drastic change because in essence it is easier to communicate with all employees and the success of the business depends on each of those employees taking on a much larger workload than an employee involved with a larger sized firm. Combine this with what Frederick Duffy says: “In the age of the Internet, at the dawn of the knowledge-based society, it is strange that we tolerate buildings . . . that assume that everyone comes in at nine and leaves at five, and sits solidly at a desk for five days a week. The model, of course, is still the factory where supervisors had to put enormous emphasis on synchrony to force a barely literate proletariat to work at the loom and the lathe. When the bell rings, the work begins. When the siren blows it is over – for the day . . . rolling out formulaic solutions has become the norm in office design”. I imagine this being the norm across the country that employees are factory workers and generation after generation exists in this format and is subsequently passed down from generation to generation than the amount of frictional force it would require to overcome nation-wide change simultaneously would be enormous. Then imagine the late twentieth century comes along and with this a booming technology called the internet and the pressure begins to build. The world is getting bigger and more interconnected. Globalization makes for stiff competition and the ability to survive or sink is a matter of how fast a company can evolve with change and the output it can receive from each employee. Where once upon a time a company could take its time changing maybe once a decade or two now exists a time where one must contend and update every couple years or be left behind. But it’s still too soon and there is not enough total pressure but the ball is rolling change overnight but what...

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The Pros and Cons of Doing Business Entirely Online Without a Physical Storefront or Presence

The Pros and Cons of Doing Business Entirely Online Without a Physical Storefront or Presence

There are many pros to doing business online and unfortunately many cons. Let’s start with the good news. One of the things that have attracted me to the world of online business is that a website, which is a virtual storefront, does not have the expensive start-up costs and monthly expenses that a physical site has. Renting space can be an expensive process and owning the space, to ensure you don’t get booted for some reason or another, a lot heftier. Considering a website business the cost of renting space on the internet is far cheaper; the cost of buying the domain name ($10-$12) secures the place and to turn the lights on so to speak (hosting) an additional $10 a month. Granted this is for a low-maintenance kind of website and depending on functionality will become increasingly more expensive but still it will be less than the rent you would pay for a physical storefront. On the flip side owning a virtual storefront means it is considerably unlikely that someone might happen to come across your website like passerby’s would in the physical world. This fact must be taken into consideration and in turn marketing is a must along with good search engine optimization in the development of your website. “Internet marketing in the old days has not been seen as a strong marketing mechanism. Now, it has continuously dominated the arena of online business.”(1) The internet is no longer the vast wasteland it once was and to get into your customers heads you’ve got to spend money so that people know who you are and what you represent. Even though typically physical stores could choose to market or not I have listed this as a con because it is almost absolute in the virtual world unless you can be highly creative or have something so solid that word of mouth carries you. Wouldn’t it be nice to be open 24/7/365 and whenever you’re at “work” you’re wearing pajamas and at the same time hundreds of miles away from the person who just bought your goods? Yeah, that sounds pretty nice to me too. You can’t get this from owning a physical store. The cost of hiring enough employees to cover a 24 hour period would be a hefty price to pay and at best you can only service people that are in your general area unless you...

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Is There Such a Concept as “Good Will” in Reality and is it Transferable?

Is There Such a Concept as “Good Will” in Reality and is it Transferable?

After thinking about it for a while I started to think about charities for some reason or another. Red Cross in particular. Perhaps the word itself had something to do with the association I began to think. It became apparent to me that good will does in fact exist as an intangible asset as I began to think about other charitable organizations in relation to Red Cross. If we were to compare XYZ charity who started up this year and had all the tangible value of Red Cross it would be logical to say that these companies are of equal value. But in fact they shouldn’t be. No not in a world where image, rapport, and reputation do have value. Now I am imagining there may be some confusion in talking about the good will of companies that do good will work but I hope to alleviate that potential confusion. My basis of comparison is more based on trust in an industry where there are charitable companies that are trusted more than others when it comes to who we choose to donate to when disasters occur. There are times when people donate to random charitable organizations (XYZ in this case) when disasters occur. But after a number of controversies came about that some charities are scams it began to change the way people donated, at least it did for me. But there was one charitable organization that I never doubted through the drama. Isn’t that worth something in and of itself? For example when I heard that there was something I could do to help with the disaster in Japan I instantly responded to the Red Cross’s ad even though I had seen plenty of other organizations ads for support that I had never heard of or if I had were obscure. I think that had a lot to do with the fact Red Cross not only has been around the block but it has also lived up to its brand. Though these other charities claim to be about good will the line that separates them from Red Cross begins to emerge. In talking about the good will of companies I think that the discussion of good will companies is a logical one. Red Cross has built its name on good will, trust, and sacrifice, and the vast majority of donations going to places that need it. When it...

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The Advantages and Disadvantages of Buying a Business as Opposed to Starting One from Scratch

The Advantages and Disadvantages of Buying a Business as Opposed to Starting One from Scratch

If you are considering owning a business have you thought about buying a business as opposed to starting one from scratch? If you have the money or can borrow from family or a bank this may not be a bad idea. There are several advantages of buying an existing business. First and foremost the business is established and has a proven track record. The most bothersome aspect to starting a business from scratch is that there’s no telling how that business will be received from the public. When you buy an existing business the proof is already there for you to see. If the owner has kept good financial records you can see income and tax returns for as long as the business has had its doors opened. Not only are the financial records invaluable but you can actually see the operation live and in progress before deciding to purchase. Granted when it comes to a restaurant or a physical store of some kind this evaluation can be easy but what if you are buying Joe’s Plumbing or Charlie’s Contracting? If you’re buying a business that was or may be successful because of who the person was and most of their business was coming from friends and family connections than is there a possibility you could lose the majority of the income when you take over and Joe retires? This is something that would need to be taken into account prior to purchasing. Make sure that if you are considering a business like this that there are some guarantees that current contracts are in place that notify and prevent current customers from walking out when the new owner walks in. I don’t think this would be important if you were taking over a retail outlet of some kind but if you are buying a business where a small handful are responsible for the income of the business than it would be wise to take proper precautions that those clients will remain once it has been taken over. After all the sale of that business is most likely valuated in regards to its annual income and if you lose that income than you are paying for something that won’t be there when you take it over. A perfect example of this is when I owned my logistics company. I had no contracts with my clients but I had contract rates....

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