In today’s world, there is more fraud than ever before. According to a survey by PWC, 56% of large business experienced some sort of fraud between 2020 and 2021, and unfortunately, the problem is only growing more prevalent as hackers become more sophisticated.
But it’s not just large companies that are targeted by fraudsters - small businesses are also at risk. Here are some tips to help protect your business from fraud:
Educate Yourself
Before you take steps to prevent fraud, it’s important to first understand the types of fraud that typically affect small business owners. The more you know about common fraud tactics and scams, the easier it will be to recognize them if your business is targeted. Some examples of prevalent types of fraud include:
- Phishing Attacks: Phishing has become a huge problem for businesses and consumers alike. Phishing scams typically come in the form of emails or text messages that attempt to “lure you in” by claiming to be a reputable company. These communications commonly contain links to malicious websites where fraudsters request personal or sensitive information. Oftentimes, these sites are made to look just like their legitimate counterparts, so it’s important to stay vigilant and not click on any links or attachments. If you have concerns that a company you do business with is trying to get in touch with you, call them directly via their publicly-listed phone number.
- Payroll Fraud: This type of fraud is twice as likely to affect small businesses (those with fewer than 100 employees) than larger establishments. Payroll fraud happens when employees steal funds that they aren’t entitled to, usually through falsified timesheets. To safeguard against this type of fraud, it’s important to verify that your payroll system is functioning correctly, that proper checks and balances are in place, and that the appropriate people are paying attention to payroll reports.
- False Invoicing: Business owners should maintain oversight over every vendor they do business with so they don’t fall victim to a fake invoice. Fraudsters target small businesses with phony invoices hoping that they will accidentally be paid along with other legitimate invoices. Be sure to have a system in place for employees to verify that an invoice is legitimate and that the amount listed on it is correct.
- Phony Online Banking and Loan Application Logins: The increased popularity of online banking services and online loan applications has led to an increase in financial services-related fraud. Cybercriminals have been known to “spoof” login pages to collect online banking credentials. Make sure that all of your employees are aware of the legitimate URL for your business’s online banking site. It’s also important to be cautious of fake loan applications. If you’re interested in applying for a business loan, be sure to visit a bank’s website directly, rather than click on ads or links you see online.
How to Protect Your Small Business from Fraud
Now that you are familiar with some of the most common types of fraud targeting small businesses, it’s time to learn how to protect your business from these perils. Here are some tips:
Train Employees
No matter how big or small your business is, employee training can be extremely effective against fraud. Whether you share relevant articles regarding the latest scams, or purchase formal training software, make sure your employees know what to look out for. As a business owner, make sure you stay up-to-date on the latest scam tactics and convey this information to your staff.
Protect Your Bank Accounts
If you’re not already, it’s a good idea to keep your personal and business finances separate. Not only will it be helpful from an accounting and tax perspective, but it can provide an extra level of protection for your finances. If you keep your business and personal finances intertwined, a fraudster could easily wipe out your entire savings by gaining access to your account. Having separate accounts can help to ensure you have access to money while going through the process of having stolen funds restored. It’s also extremely important to check your bank accounts frequently for any suspicious activity, and to alert your bank immediately if you notice anything amiss.
Don’t Skimp on Employee Background Checks
While employee background checks might seem time-consuming and expensive, you will likely want to know if a prospective new hire has a criminal background. While references and work history are important, it’s also crucial to know how trustworthy a potential employee is. In many cases, the fraudsters doing to most damage to a small business are dishonest employees.
Guard Your Computer Systems
Hackers are experts at cracking even the most robust security systems. However, you shouldn’t make it easy for them to gain access to your company’s data. Ensure that all of your business computer systems have antivirus software and that your network is secure. Also make sure that your computers are password-protected, and require employees to update those passwords regularly. It’s also a good idea to back up your company’s files on a regular basis and store them off-site. This will allow you to access important files and data if a breach should occur and your entire business system is taken down by a hacker.
You Are Your Own First Line of Defense
You are the first line of defense against fraud targeting your business. Educate yourself on fraud tactics and the popular scams going on within your industry. The good news is that in today’s digital world it’s easier than ever to stay up-to-date on practical ways to limit your risk of fraud.
For more small business security tips, visit our Business Security page.