What security measure is often taken by new businesses to protect against financial fraud?

Establishing cash reserves is a crucial security measure for new businesses aiming to protect against financial fraud. By maintaining a sufficient amount of cash readily available, a business can create a buffer against potential fraudulent activities that may impact its finances. This practice allows for the immediate coverage of unexpected losses caused by fraud, such as unauthorized transactions or financial mismanagement.

Additionally, having cash reserves enhances a business's overall financial stability, enabling it to respond effectively to threats and risks, such as fraud attempts, without jeopardizing its operational capabilities. This strategic reserve provides the flexibility needed to address situations as they arise and can also serve as a foundation for sound financial planning.

In contrast, creating financial forecasts focuses more on predicting future income and expenses rather than providing direct protection against fraud. Hiring a financial analyst might enhance a business’s understanding of its financial health, but without funds to address fraudulent losses, the potential for damage can still exist. Expanding product offerings, while beneficial for growth and diversification, does not inherently safeguard against financial fraud, as the core risk persists regardless of the business's breadth of offerings.