This guide outlines the crucial fraud protection strategies that all small businesses should have in place.
Nowadays, in an increasingly connected world, digital technologies make it possible for business to be done in the blink of an eye. However, they also help disguise the identities and machinations of the people who conduct these businesses. This makes fraud much more widespread and sophisticated.
Likewise, the impact of fraud on organizations, stakeholders and entire economies has also greatly increased. In the last year there were 2.2 million reported fraud cases in the United States representing a huge amount of lost money for consumers and businesses. The most common type of fraud in 2020 was identity theft; which is something every small business owner needs to be aware of.
Fraud can mean a disaster for your company and it is in everyone’s interest to do their part to detect warning signs. Any weak point in your business can be an entry point for fraudsters to access sensitive data, goods and money.
This is where a complete fraud protection procedure proves to be paramount. The fact is that you can keep your company protected by drawing up an action plan to detect fraud and prevent it from happening before they cause any kind of damage. But do you really know how fraud protection works in a small company?
Fraud protection for small business
In this article we take a look at some of the practical steps that you can take, as a small business owner, to protect yourself and your customers from the damaging impacts of fraud.
Complete an Audit
“If you know the enemy and know yourself, you need not fear the result of a hundred battles” — Sun Tzu
The wisdom of revered Chinese general Sun Tzu is still relevant today over two and a half thousand years since his death. This quote has real pertinence to your small business operations. If you want to prevent fraud you first need to complete an audit.
Identify the areas in which you could fall victim to fraud, then identify the people or persons that could commit fraud. This could be your in-person customers, your online shoppers and even your staff.
Then look up some of the most common frauds taking place in the USA at the moment and work out which areas of your business operations need reinforcing to defend against scams. That’s knowing yourself and that’s knowing your enemy.
Modernise Processes
It might be 2022 and Elon Musk might be talking about a piloted mission to Mars but there are still tens of thousands of businesses in the US paying their employees as if it were 1980.
Whilst cash might be handy and you might like writing out your payslips and vouchers by hand, those practices are not conducive to a fraud free workplace.
It’s a good idea to invest in automated and secure voucher checks and payslip technology. The more you modernise your business processes, the harder they are to defraud.
Enforce Password Policies
It’s not at all unusual to walk into an office in the US and find a password scrawled on a whiteboard for everyone to see. What is even more common is small business owners using one password and one password only for all of their technological operations.
Imagine the havoc a fraudster could wreak if they got hold of that password. Imagine how easy it would be for an employee with bad intentions to get into your payroll and adjust a couple of figures without you knowing.
Your small business needs a password policy for fraud protection. Don’t have the same password for everything. Give out password information on a need to know basis. Change your passwords at a minimum, once a month.
Pay the Online Price
1 in 4 Americans shop online at least once a month and last year, the average spent online per person in the US was $1,804 over the course of the year. There’s no denying then that online shopping is the future.
If your business is not online yet, it should be and if it is online, you should be taking every step to ensure that it is as safe as possible. For most of us that means outsourcing the running of our website to a reputable company.
But it also means taking care to back up your website for fraud protection so that, in the case of cyber fraud, you don’t lose all of your hard work.
Old Fashioned Security
Make sure that your offices and premises are securely locked when you’re not that. Nowadays we don’t only have to worry about someone stealing our computers, we have to worry about them stealing the data that is stored on them as well.
The best way to protect against this is by doing what businesses have been doing for centuries; invest in the best security you can get. Whether that be alarms, shutters or even basic padlocks, make sure that your property is safe when you’re not there.
Monitor processes
Every organization big or small should take its fraud protection due diligence checks seriously. Before you start working with a new customer, do some research to make sure they’re honest and legitimate about the company.
Some questions to ask are:
- Do you have certifications or accreditations?
- Are your assets valued fairly and accurately?
- How do your recent financial results compared to last year’s?
- Is it adequately covered by insurance?
- Never save on questioning. If you’re running out of time, hire a professional so they can do this job for you. Large companies usually have a team taking care of only these issues.
Empower the team in fraud protection
Think about the right fraud detection and fraud protection strategy for your business: it should detail controls and procedures. Employees seek out owners and managers for guidance on acceptable behavior. Talk about fraud with your team, suppliers, and other contacts. Your team needs to understand the risks and how losses affect the business and itself.
Your employees are the people many fraudsters will try to manipulate to exploit your business. But how can you expect them to detect fraud if you don’t train them? A risk-based approach is an effective way to tailor your training so that it is meaningful to people in all roles.
By evaluating the ways in which your business is most vulnerable, you can show each team member exactly what to look for on a day-to-day business. Give them confidence by explaining accurately how to report any concerns. You can use a hotline, for example.
Try not to deliberate on the obvious points and consider looking at online courses to get inspired or have an expert to give the training some focus, structure and expert vision. This should not be a single training session. It should be structured periodically and involve update sessions in order to review any new regulations and risks.
Summary
Strategies for fraud protection are now beyond simply being important for small business — in today’s world, fraud protection is crucial!
