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Fraud is on the Rise: How to Protect Your Small Business

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After a year of tremendous challenges, small businesses are optimistic about their ability to bounce back and grow in 2021, according to a Capital One Small Business Confidence survey. While most of 2020 was focused on the global pandemic 2020 and the hope for economic relief, businesses need to ensure that they are protecting themselves from additional risks, namely fraud. In a recent survey conducted by the Association of Certified Fraud Examiners (ACFE), 90% of respondents say they expect fraud to increase over the next 12 months.

It could be a fake message claiming your small business trademarks are expiring, or “customers” start requesting bogus chargebacks from credit card companies. It might even be employees committing internal fraud. Whatever the case, small businesses are easy targets for criminals who believe smaller companies don’t have the proper preventative policies in place to recognize fraud.

If you are the victim of a fraud scam, it’s essential to immediately report the incident to the Federal Trade Commission (FTC). To make reporting easier for small business owners, the FTC just updated ReportFraud.ftc.gov, its consumer reporting website, to include small business reporting.

However, fighting fraud needs a proactive approach. Here are three common types of fraud and how to protect your small business from falling victim to them.

1. Cyberfraud

For any business with online activity, a cybersecurity plan is crucial to establish and follow. According to the Federal Communications Commission (FCC), digital information theft has become the most commonly reported fraud, exceeding physical theft. When you create your cybersecurity strategy, the FCC recommends you follow these tips:

  • Train your employees. Establish basic security procedures for employees, including using strong passwords, protecting customer data and other vital information.
  • Update all devices to the latest security software, web browsers, and operating systems. Use antivirus software and firewalls.
  • With so many employees now working remotely, create a mobile device action plan to encrypt data. Also, make sure each employee has a separate user account, so you or your accountant can trace any activity if there’s a problem.
  • Back up critical business data and store the information in the cloud.
  • Secure Wi-Fi networks with Service Set Identifier (SSID) and password protection.
  • Work with banks or credit card processors to safeguard payment information.

2. Payment and Banking Fraud

Payment fraud is characterized in several ways, such as bounced checks, unauthorized transactions, lost or stolen stock, and fake requests for refunds/returns. Most hackers target credit card users and credit card merchant accounts using stolen card numbers. To prevent payment fraud, make sure you are aware of the newest fraud trends, encrypt payment transactions, and partner with a secure payment processor, such as Bill.com.

They will never ask you to provide credit card or ACH information in an email or over the phone and won’t ever send ZIP or EXE attachments (many of these attachments contain viruses).

Plus, your online bank account is at risk for accounting fraud, so limit how and with who you share confidential banking information. A payment solution like Bill.com protects your banking information by allowing payment without ever accessing the online banking account. Bill.com builds in user-based permissions, which means you can control what employees can see.

3. Employee Embezzlement

Unfortunately, employee fraud is a very real and costly risk for small businesses—especially in a struggling economy. To prevent employee fraud, check out these tips from Bill.com:

  • Go paperless. Paper invoices and checks are a security risk. Going digital reduces the chance of thieving hands having access to the information, and you, your accounting department, or your accountant can easily track every transaction.
  • Enforce payment controls. You can enable fraud preventive accounting controls and authorization limitations by using digital solutions.
  • Automate work processes. By computerizing reminders and creating an audit trail, you ensure that nothing falls through the cracks.
  • Eliminate checks (incoming and outgoing). Paper checks contain confidential information that cybercrooks can use to access your business’s financial information or accounts. When you receive and make payments electronically, you shield these numbers from unauthorized people.
  • Increase the number of regular internal audits you conduct. Automated digital systems create an easy-to-trace audit trail.

Bill.com can improve your accounting process by helping your business pay invoices and get paid faster. Plus, Bill.com can help you protect your small business from fraud. Give it a try risk-free today!

This article, “Fraud is on the Rise: How to Protect Your Small Business” was first published on Small Business Trends

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