Last week’s post, More Red Flags of Fraud, discussed how management should be trained to always be on the lookout for behavioral changes in employees that may be red flags for fraud. As the column pointed out, 92 percent of the people who committed fraud exhibited certain behavioral traits. Recognizing those can be the key to detecting and preventing fraud.

Being aware of and dealing with fraud is crucial for any size business, but particularly for small businesses for three reasons:

• They are disproportionately victimized by fraud
• They are less likely to have fraud protection measures in place
• There tends to be a greater level of trust in small offices

That’s according to the Association of Certified Fraud Examiners (AFCE). Small businesses, defined as those with fewer than 100 employees, suffered 28.8 percent of all fraud cases, with an average median loss of $154,000.

The average median loss was higher for the largest entities, defined as more than 10,000 employees, at $160,000. But obviously that is a much smaller fraction of overall revenue than for smaller companies.

So you’re a small business and can’t afford the most expensive fraud detection systems. But there are plenty of measures you can enact to cut down potential for fraud in your company. Here are a few suggestions.

• Select the right employees. Always check references and criminal records. You may want to conduct credit checks to make sure your potential employee is not in dire financial straits, which can set the stage for him to consider committing fraud.

• Separate accounting duties. Many small businesses delegate all the financial dealings to one person, who opens the mail, writes checks, reconciles the accounts and generates invoices. This makes a business vulnerable. If you don’t have the staff to completely separate duties, then have some of the responsibility rotate around the office if possible.

• Always prosecute theft and fraud. Make it clear that you have a no-tolerance policy towards any type of theft or fraud and you will prosecute any and all people involved. This is easy to include in an employee manual. “If you steal, you will be prosecuted to the fullest extent of the law.” If the policy is equally applied to all employees, no one, even in a small office, should feel mistrusted.

• Conduct surprise audits. Ask to see the books and review invoices and accounts payable. Call a few of the businesses to make sure they are legit and that your company is doing business with them. Or call your CPA in for an unannounced mini audit to uncover any problems.

• Create an official office fraud policy and train every employee on it. You can read more about it in my previous blog, “Fraud Prevention Tip: Leverage the Value of an Informal Fraud Policy.”

• Have your controller, bookkeeper or CFO take off two consecutive weeks each year. I recommend this measure to all my clients as a way to prevent and detect fraud. In their absence, do their jobs. Open the mail, review deposits, correspond with vendors.

• Purchase the ACFE’s Small Business Fraud Prevention Manual. At $59, it’s money well spent. The manual goes into detail on how employees steal. It also gives prevention tips and how to deal with dishonest employees.

And as long as you are buying books, add my book to the list. How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes contains a chapter called “Stop Fraud Before It Starts” and includes ways to create an office fraud as well as tips on preventing fraud in all size companies.

You’ve worked hard to create revenue for your business. Don’t let anyone steal any of it from you.