How to Protect your Business from Common Frauds
Fraud is one of the most common ways businesses can lose money, but there are ways to avoid being the victim of fraud. According to the Association of Certified Fraud Examiners (ACFE), U.S. companies will lose an average of 5 percent of its annual revenues to fraud. Small businesses are at an even higher risk of fraud than larger companies and non-business owners.
What is fraud?
Fraud is the act or course of deception, an intentional concealment, omission, or perversion of truth, to (1) gain unlawful or unfair advantage, (2) induce another to part with some valuable item or surrender a legal right, or (3) inflict injury in some manner.
What Are Types of Fraud?
There are many types of fraud that can affect businesses, including:
- Bankruptcy fraud – this might include hiding or undervaluing assets, concealing information about the company or destroying documents
- Mail fraud – using the US Post Office to make false representations
- Employment fraud – stating false information on an employment application or not reporting convictions and felony charges before hire
- Insurance fraud – claiming an injury or falsifying insurance claims documents
- Wire fraud – the use of electronic communications (including Internet, TV, or radio) to make false representations
- Identity theft – the act of stealing business information, usually electronically, and including tax information and credit card fraud.
Don’t be a victim. Here are a few ways to protect yourself and your business:
Employee background checks
Background checks are a must when hiring employees. The business should have written permission to conduct such investigations, including a criminal background check, verification of education, right to work, licensure and previous employment. If the employee will be handling cash or inventory, a credit check should be performed.
Train your employees
To prevent the loss of cash, train your employees to spot counterfeit money, bad checks, and stolen credit cards. Put specific policies in place when dealing with any one of these situations. Also, consider putting surveillance cameras in place to keep an eye on your customers and employees.
Protect your credit cards and bank accounts
It is important to start by separating your business accounts and your personal banking accounts, including credit cards. This will ensure that fraudsters will not get their hands on all of your money. Also, make sure that you’re using your business card wisely. It isn’t wise to hand over your credit card or card number to any employee or company that you’re not familiar with. Be sure to log onto your online banking every day to check for suspicious activity.
Separate financial duties
Doing this will ensure that no one employee has all of the financial responsibility. With the separation of duties, checks and balances can be performed to make sure everything is running smoothly. But do not give up your financial responsibilities to any employee, which includes check-writing. You must have some financial responsibility yourself.
Secure your IT infrastructure
Investing in a firewall, as well as an anti-virus, malware and spyware software is something every business owner should do, especially if your computers have customer data and other sensitive information. The software should be installed and always up-to-date on every employee’s computer. Also, making frequent back-ups will make it a lot easier to continue to work if a cyber-attack were to happen. Have a password policy. Make sure you and your employees change your passwords regularly, usually every 1-2 months, and don’t use the same password for all of your accounts.
Use a designated computer for banking
An easy way to fight against fraud is to use a dedicated computer for all online financial transactions. You must make sure that this computer is not used for email, web-surfing or social media, that way it’s much harder for outsiders to gain access to your information.
Insure your business
No matter what, you will never be completely safe from potential cyber-attacks. One of the best ways to make sure that you and your business is protected is to have an insurance policy that covers any losses from cybercrime and computer fraud. Many insurance policies are affordable, costing just a few hundred dollars a year.
How will you protect your business from fraud and cybercrime?