Why Most Family Businesses Are Easy Targets for Internal Fraud
By Todd Wentz, CEO, Wentz IT Consulting
Fraud doesn’t just happen in Fortune 500 boardrooms—it happens in family-run businesses, nonprofits, and local shops every single day. The difference? Big companies make the news. Small businesses often just go under.
When I work with family-owned or tight-knit teams, I see the same patterns that existed at companies like Enron and WorldCom: over-trusting leadership, lack of documentation, and no segregation of duties. Combine that with informal processes and you’ve got a fraudster’s dream.
Trust is Not a Control
Most small business owners trust their staff—and that’s not a bad thing. But trust should never replace oversight. When you assume things are fine because “she’s been with us for 20 years,” you stop looking for problems.
That’s when they grow.
Common Vulnerabilities in Family Businesses
- One person handles the books, pays the bills, and reconciles the bank account
- Shared logins or default passwords for critical systems
- No documentation of who approves purchases or expense reimbursements
- Cash handling with no tracking or spot checks
- Owners too busy to review reports or check vendor lists
Sound familiar? You’re not alone—but you are exposed.
Small Changes That Make a Big Difference
- Split financial responsibilities (approval vs. payment)
- Require receipts and approval for all reimbursements
- Review vendor lists quarterly and watch for similar names or new entries
- Require users to log in with named accounts—no shared passwords
- Back up your systems and audit access regularly
What MSPs Like Mine Can Do to Help
- Lock down financial systems with access controls and MFA
- Set up audit logs so you know who’s doing what
- Create simple, repeatable approval workflows
- Review your systems with fraud risk in mind
Fraud prevention isn’t a luxury—it’s part of protecting what you’ve built.
Final Thoughts
You don’t have to become a fraud expert overnight. But you do need to stop assuming it “won’t happen here.” Because when it does, it’s not just about the money. It’s about broken trust, damaged reputations, and business lost forever.
Start protecting your business today. Download our free Access & Approval Policy Builder to tighten things up without slowing you down.