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5 Ways Fraud Can Kill your Business

Updated on November 9, 2015

Fraud is something that can affect any business. Fraud could be perpetrated by random criminals, customers or even employees. The effects of fraud can be devastating for any business. It could even cause a complete shutdown. Here are five ways fraud can kill your business.

Drain Money Until Nothing Is Left

The main way fraud can kill your business is by draining money until nothing left. Fraud that goes on undetected can start small and then eventually expand until your revenues are no longer covering your costs or basic overhead. Your business could quickly be left with empty accounts and no way to continue operating. Fraud can affect revenue, savings or nearly any part of your business finances.

Undermine Consumer Trust and Loyalty

If word of fraud gets out to consumers, then it could kill your business. Fraud can undermine consumer trust and loyalty in your company. This includes long-time customers. Those people might start to feel that your business is not adequately protecting the personal and financial information of consumers. This can cause an exodus of customers who move on to other businesses and never return.

Bring the Business to a Halt Due To Logistical Problems

If fraud is occurring, then it can bring your business to a complete halt due to logistical problems. You might have to go through nearly every part of the business in order to determine the extent of the fraud and to stop it from happening. This can leave you unable to operate normally until all problems are solved and every part of the business has been thoroughly investigated. This could cause your business to fail if things take too long.

Trigger Massive Lawsuits

Fraud can potentially expose the private information of consumers, employees or business partners to criminals. The result could be massive lawsuits against your business from those individuals. This can force your business to spend a fortune in legal fees attempting to settle cases. There is even a chance that the lawsuits might go to trial and end in a large judgment against your business. This can kill your company fast.

Devastate Inventory Levels

Some types of fraud will involve moving inventory out of your business. One way fraud can really kill your business is by devastating inventory levels. The business might end up with nothing of value to sell. Entire shipments might go missing. This can leave your business in financial trouble with no inventory to sell to earn back any money.

Roman Temkin is a real estate developer from NYC.


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