Perhaps no event can detract from a business as quickly as fraud. Fraud is becoming more widespread. According to a survey by PriceWaterhouseCoopers, almost half of companies experienced some type of economic crime in 2009, and nearly 90 percent of U.S. companies that reported fraud experienced a drop in financial performance. No business is immune to fraud, and any business owner needs to know how to protect their business from it.

Small businesses may be even more vulnerable to fraud than larger, more established firms. Management styles and oversight at small businesses can be informal, and often small employers don't practice the safety measures and safeguards against fraud that larger companies employ.

The most common sources of fraud:

• Internal employees and managers (theft of assets, accounting fraud, fraudulent workers' compensation)
• Customers (paying with stolen credit cards or bad checks, theft, false returns, fraudulent liability claims)
• Contractors (overbilling, failing to perform contracted services)
• Third-party attacks (hacking, phishing, identity theft)

Crafting thorough, clear corporate policies and procedures, as well as putting safeguards in place, can help you avoid business fraud.

• Conduct thorough background checks of all employees.
• Train employees to spot bad checks, stolen credit cards, and counterfeit currency.
• Have written policies for handling and tracking stock, inventory, and equipment.
• Review invoices, purchase orders, and payments frequently.
• Institute safe data handling procedures and safeguard sensitive information, both physical and electronic.
• Lock down e-mail, electronic devices, cell phones, and electronic storage.
• Write clear policies for electronic device and Internet usage.
• Invest in tools that can deter or combat electronic fraud.