If you own a small business you already know that your survival depends on your profitability. If you're not making enough money you'll soon fail. Making sales, however, is just part of the equation. You must also minimize your losses. If the cost of doing business is greater than your profits you won't last very long. Overhead is one thing, but what about losses due to theft and fraud? How much money are you losing every year?

The sad fact is, many small business fail because of employee theft and fraudulent schemes. The Association of Certified Fraud Examiners has found that the average company suffers losses of over 6% of total revenue every year. What if you could reduce that number? Every instance of fraud you prevent adds to your profitability. Less fraud equals more profits. It sounds simple doesn't it? Well, it is. Here's how you can do it.

1. SCREEN YOUR EMPLOYEES. Every business should conduct at least some form of pre-employment background check. Past activity is a good predictor of future conduct. By eliminating questionable applicants you can prevent employee theft before it starts. Just be sure that you comply with all applicable laws like the Fair Credit and Reporting Act. Every company is entitled to screen potential employees but you must make sure not to discriminate or violate their rights. Use a licensed screening agency to ensure compliance. Visit the National Association of Professional Background Screeners for more information at http:www.napbs.com

2. CONDUCT AN AUDIT. Have your accountant or an outside consultant take a good look at your books and records. An examination may discover an embezzlement or misuse of funds. Make sure your company utilizes best practices in its accounting procedures.

3. CONDUCT A SECURITY SURVEY. Consider hiring a security consultant to perform a survey of your company. Examining physical security measures, employee policies, and risk assessments can show you where you are vulnerable.

4. DEVELOP A SECURITY POLICY. Use the information you collect from the audit and security survey to develop a comprehensive plan to prevent fraud and theft. Have your attorney review and approve of the policy and integrate it into your day to day operations. Make sure all employees are aware of the policy and are implementing it.

5. TEST AND EVALUATE. Periodically review your security procedures and test the effectiveness of your plan. Adapt your procedures as your situation changes. Advances in technology, for example, may necessitate the need to upgrade your computer security. Stay ahead of the curve.

Eliminating all fraud may not always be possible, but those companies taking a proactive approach to security will reduce their losses significantly and thereby increase their profits. So rather than ask if you can afford to take these five steps, ask yourself if you can afford not to.