It’s shocking that in this day and age there are so many instances of business fraud still occurring across the US. High-profile stories of large-scale embezzlements might make the news, but it’s the small businesses and Mom and Pop stores which are actually most at risk. US businesses lose an average of 5% of their earnings to fraud each year, with 42% of reported instances of business fraud happening in private companies and small businesses with less than 100 employees.
Business Fraud can come from inside or outside the company, but either way there are some important steps you can take to help protect yourself and your profits.
Separate Duties
When you’ve only got a few employees, it’s usual for people to double up responsibilities. But when the same person is in charge of opening the mail, filing the invoices, and paying them, there’s no one to check that only genuine ones are being paid. Whether fraudulent bills slip through on purpose or by accident, having two different people involved in the process would act as security check and help to reduce fraud.
Train Workers to Spot Scams
It’s important to educate your staff on some of the most common business frauds so that they can help you spot them if you get targeted. Many types of scams involve imposters calling pretending to be from utilities, suppliers, government agencies, or tech support. If your employees know they need to verify each caller, and how to do so, it will prevent fraudsters getting their hands on your cash.
Increase Security
Invest in products designed to keep your business safe. Good cyber security is vital for keeping hackers out of your computer systems. Once a virus or worm is planted, most businesses have no choice but to pay the ransom to unlock their vital systems again, so preventing this can be well worth the investment.
Another way to safeguard against fraud, this time internal, is to use secure checks for paying bills and wages. With holographic and heat-sensitive security marks you won’t have to worry about fraudsters forging payments from your business.
Set Up an Anonymous Tip Line
You might pride yourself on hiring trustworthy employees, but you don’t know what might be happening at home that could lead anyone to think about committing fraud at work. Financial difficulties, bad debts, bereavement, or mental health issues could all make someone desperate enough to steal money or agree to sell security information. By setting up an anonymous tip line straight to the boss, you give worried co-workers the opportunity to stop fraud before it starts, without them worrying about their name getting out. In 2020, 43% of detected fraudsters were caught by an anonymous tip.
How to Report Fraud?
If your business becomes the victim of fraud from any source, you can report it to the FTC who will then investigate on your behalf.
As a small business, being a victim of fraud can be scary. It can make management second guess every decision, which can lead to a breakdown of trust in the workers and undo all the hard work which was done to make the workplace a great place to be. But it’s not just the loss of trust, the stolen financial assets can leave a considerable dent. 54% of internal fraud cases in 2022 saw none of the stolen money recovered. These losses can run into six-figures, which can be a considerable percentage of accounts.
In Summary
Internal fraud is often harder to diagnose than external fraud, but you’re not going to be protected against either unless you implement prevention strategies. Training staff to be vigilant and setting up an anonymous tip line for them to use have been proven to be incredibly effective and are often the cheapest options. Purchasing additional security to prevent check counterfeiting and the implantation of computer viruses are also good options.
