Protecting your business from fraud and scams must start inside. Employees perpetuate corporate fraud as frequently as con artists.

You may ask why small businesses are a primary target for cons. That's easy. Small businesses may not be as adept or well-equipped to protect sensitive information - and money - as larger companies, which can afford to hire dedicated staffs to ensure oversight and security.

Internal fraud persists as a problem for businesses of all sizes. Les Lake, regional forensic services manager at Eide Bailly in Boise, says three out of four businesses will be victimized by fraud. Business fraud, on average, costs business more than $150,000 per incident. That's nearly three times more than scams targeting individuals. Lake says primary areas where businesses should be concerned with internal theft are procurement, corruption and identity theft.

I'm going to focus on procurement theft in this column. Procurement theft can occur from inside or outside the company. This theft is often not easy to identify but has become more apparent as small businesses grow.

Opportunities for internal fraud may open if your business has poor or nonexistent record-keeping, over-the-top entertaining by suppliers, changes in the normal purchasing processes such as the use of personal emails and texts, or improper training of buyers.

The best way to prevent embezzlement, bribes or kickbacks is to set up careful bookkeeping processes. Supplier and retail invoices and billing statements must go to one person. This is crucial for small businesses so bills are not paid twice or overlooked.

Fraudulent companies may prey on businesses that have poor record-keeping practices. A fake bill may be sent to your company with a hopes that it passes without question. There have been several scams of this type in the Treasure Valley.

Recently, a business identifying itself as Corporate Records Services of New York tried to make local companies believe their "annual minutes" must be processed correctly by the state. The scheme is that Corporate Records processes your minutes, but the state doesn't require it. The cost: $125.

Here are some training tips:

Æ Train employees to recognize the most common business scams.

Æ Teach proper phone procedures that stop con artists from having fraudulent "orders" approved. Start by never saying "yes" to vague questions.

Æ Investigate your suppliers by performing background checks to make sure they meet your standards.

Æ Educate employees on why it's important never to release confidential information about your business to unknown parties.

Æ Encourage employees to question every action that does not fall within your procurement process or ethical standards.

Ethics start at the top and flow down. Business leaders must set standards of honesty, truthfulness and integrity. You should conduct employee interviews and give ethics training classes to re-enforce your beliefs. Encourage employees to report questionable actions, and act quickly when a problem is reported.

Establish a genuine open-door policy with a hot line open to all employees and customers. Communications can solve most inside business frauds.

rhicken@boise.bbb.org, 947-2115