Fraud can happen to anyone, from individuals to large corporations. But small businesses face a number of risks that can leave them vulnerable to fraud.
Since small business owners often put so much of their own resources into their businesses, fraud can be especially damaging.
Let’s go over some of the common types of fraud that small businesses face and tips for fighting fraud.
Payroll, Bookkeeping and Accounting Fraud in Small Businesses
Payroll, bookkeeping and accounting-related fraud are common in small businesses. Since small businesses tend to keep smaller staffs, sometimes there is only one person who handles all of the accounting, bookkeeping and payroll.
It can be harder to catch fraud when one person is in charge of all money-related functions. Because if the person is good at covering their tracks, they could cover up the fraudulent activity and make it difficult to spot.
How to Fight Payroll, Bookkeeping and Accounting Fraud
If possible, try to have more than one person perform payroll, bookkeeping and accounting functions. Consider having one person focus on the accounting side and another handle anything cash-related.
Also, audit everything that relates to payroll, bookkeeping and accounting on a regular basis. Even when your business is busy and you have a million things to do, make it a priority to know what is going on with your money.
If you use a payroll service, you can also get reports to help monitor things like cash requirements.
Invoice Fraud in Small Businesses
Invoice fraud is another common issue for small businesses. There are different types of invoice fraud, so it could involve employees, vendors or scammers.
False invoicing could be done by employees or vendors. This type of fraud could be an employee creating false invoices in order to steal money from the business. Or vendors could inflate or falsify their invoices to get extra money they did not earn.
Scammers have also created an invoice-related scam to trick business owners. They learn who your suppliers are and then create emails that appear to be from your supplier, but they are actually from the scammer. These emails trick business owners into paying scammers when they think they are paying their legitimate suppliers.
How to Fight Invoice Fraud
Pay attention to your invoices and do research if you see something suspicious, like payments made to vendors you don’t recognize. If needed, get expert help for auditing.
Get to know your employees and vendors and make sure that you have accurate contact information for them. Never enter into a contract with a vendor or supplier without confirming that the business is legitimate.
To prevent invoice email scams, keep a close eye on all emails. Scammers may use email addresses that are similar to your vendors, but not exactly the same.
Misspellings, incorrect logos or a change in the email’s tone could be signs of a scam. Never open attachments or click on links unless you know what they are and where they are going.
Credit Card Fraud in Small Businesses
Many small businesses have to accept credit cards in order to avoid losing customers. Unfortunately, credit card fraud is an ongoing problem for many business owners.
Scammers can put skimming devices on card readers to steal the personal information of your customers. Thieves may steal credit cards and use them in your business. If you take payments over the phone or online, stolen credit cards may be used.
There is also credit card fraud that could impact your company’s credit card, if you have one. If employees use a company credit card to pay for business expenses, they may mix personal purchases in there.
Businesses are also sometimes targets of identity theft. For example, this could occur if someone steals your business data and takes out a credit card in the name of your business.
How to Fight Credit Card Fraud
To start, make sure all employees learn best practices for credit card safety, like checking for identification. Make sure your business follows security standards and stays up to date with them.
Use technology to help you stay safe, like an Address Verification System and chip readers for credit and debit cards. Make sure that your business uses anti-malware software to protect all devices with business information on them.
Make sure to process online or phone payments securely. Do not store customer payment data if you can help it. Always follow regulations when it comes to your customer’s personal information.
Tips for Fighting Fraud in Your Business
There are so many other types of fraud that could impact small business owners. Even something as simple as an employee not ringing up a customer in the system and pocketing the cash could lead to major losses for your business.
Here are some additional tips for fighting fraud in your small business:
- Train all employees to spot and report fraud warning signs
- Check into any potential fraud right away and report it if you find it
- Log in to online banking regularly to monitor business accounts
- Look out for unusual behavior from customers, vendors or employees
- Consider having more than one person sign off on accounting and payroll transactions
- Secure network access in your business
- Learn about common online scams and how to prevent them
Persistence and attentiveness are key. It can be tedious to go over every detail of the business, but it is worth it if it keeps your business safe.