Fraud involves the theft of money from a business. It may happen directly through actual stealing, or indirectly when time is wasted or equipment misused. In either case, fraud can have a profound negative effect on your business regardless of its size, underscoring the importance of fraud awareness and support.
How fraud can damage your business.
The effects of fraud can be far-reaching. They can include:
- Financial problems stemming from the loss of money or products, as well as the cost of cleaning up after the incident and instituting prevention measures.
- Short- and long-term damage to the reputations of you and your brand.
- Increased accounting costs. You may need to pay more to audit your accounts and may even be under additional scrutiny from regulators that increases your consultant expenses.
- Reduced income from funding sources when they learn of the incident.
- Sabotage or disruption of digital resources.
- The need to fire employees responsible for perpetrating the fraud or for failing to detect it.
To be aware that fraud could potentially pose problems for your business is one thing, but what can you do to keep it from happening in the first place?
1. Know your employees.
Even if your business is small, you can never be too careful about the people you hire. Conduct thorough background checks on everyone who will ever handle cash or manage customer information, giving even more scrutiny as each person’s level of financial responsibility increases. When accounting staff go on vacation, use this opportunity to inspect their work just to make sure that everything is above board.
2. Distribute accounting responsibilities.
Although it may seem logical to delegate all bookkeeping, invoicing, and petty cash jobs to one person if your business is small, this makes you vulnerable to embezzlement or fraud. A better option is to divide the duties between two people or to outsource these responsibilities to a third-party CPA firm.
3. Implement anti-fraud policies and procedures.
All businesses should have documents in place specifying internal controls. These should cover details such as access permissions for financial and customer information, multi-employee sign-off on accounting or payroll functions, periodic reviews of audit logs, cyber hygiene, fraud awareness training, and much more.
4. Oversee business bank accounts.
Thanks to online banking, you now have timely access to your account records. Periodically scrutinize them to be sure that they are compatible with the paper statements you receive. Watch out for missing or out-of-sequence checks, checks signed over to unknown third parties, and unknown payment recipients.
5. Train your employees.
Unless they are taught the signs of fraud ahead of time, workers may miss red flags pointing to a coworker or customer fraud. Be proactive by creating and regularly implementing a thorough training program that covers fraud signs, how to prevent fraud, and the protocols involved in reporting suspected activity. Also, be sure that all employees understand the direct, specific consequences of committing fraud.
6. Keep personal and business accounts separate.
As a business owner, you need to do everything you can to safeguard credit card information. That means keeping your personal and business accounts separate and distinct.
7. Become and remain PCI compliant.
Work with your merchant services provider to ensure that your payment processing hardware and software are up-to-date and in compliance with the Payment Card Industry Data Security Standard (PCI DSS).
Fraud is a risk that every business must grapple with. However, it can be minimized if you foster an environment of awareness that places an iron-clad commitment to providing advanced payments security solutions, processes, and training high on your priority list.
