According to a report by the Association of Certified Fraud Examiners, which is the largest global anti-fraud agency, small businesses constitute 31.8 percent of all fraud-related cases reported per year. This is a significantly higher percentage than for larger businesses. The losses for a small business are also amplified due to their relative size and resources to larger corporations. To make matters worse, roughly 50 percent of fraud-related cases fail to recover compensation for the business.
Define Different Types of Fraud
Before launching your offensive plan for taking on fraudulent behavior and processes, you’ve got to know what you’re up against. As a small business, there are different angles from which fraud can attack. Fraudulent acts can fall under three categories, namely theft, financial statement fraud, and asset misuse. According to experts, theft is the most common category of fraud, which involves stealing cash, creating false expenses, and taking business assets.
Vet Your Employees
Employees are often the culprits of fraud, particularly theft. Although this can be difficult to swallow for any small business owner, it’s a reality one must acclimate to if future cases of fraud are to be prevented. Vet your employees for any criminal records he/she may have, such as past theft or identity fraud convictions. Making the right hiring decisions is the first step to proactively avoiding fraud.
Educate Your Workforce
Employees are arguably one of your biggest points of entry when dealing with fraud. Educating your workforce, however, can also turn them into your biggest line of defense. Conduct regular training sessions concerning fundamental security threats and how to prevent each one. Your employees must also learn how to properly use the company’s confidential data including but not limited to financial statements and customer contacts.
Dedicate More Than One Person to Handle Accounting
Small businesses often choose to delegate accounting and bookkeeping tasks to one person due to their limited manpower. This leaves only one person responsible for overseeing a variety of key functions including client receivables, client payment processing, invoice payments, petty cash management, and recording through the chosen accounting framework. This makes it fairly easy for fraudulent behavior to go unchecked within the business. Instead, have at least two people handle these tasks.
Change Passwords Regularly
Don’t just encourage your employees, make it a requirement to change account passwords at least once every two or three months. Set specific parameters for passwords, such as at least one upper case letter, one number, one special character, etc. Make sure passwords are more complex than just “password123”.
Protect Your IT Infrastructure
Small business owners will do well in investing in a robust IT infrastructure, comprising of a firewall and antivirus system. Data backups are also something you should regularly perform. Backing up data to a cloud-based server is a great way to protect from fraud and malware attacks.
Safeguard Credit Cards and Bank Accounts
Just as you would protect your customer’s information, be sure to protect your personal and business bank accounts and credit cards. Keep separate accounts so it’s easier to keep track of and hackers don’t get a hold of all your cash after hacking one account. Your card numbers must also only be entrusted to employees and business partners you have full confidence in.
Get Business Insurance
Fraud and cybercrime are events that you cannot fully circumvent. Being prepared of the aftermath will give your business a cushioned pad from which to restart and rebuild again. One of the best ways to prepare for fraud-related damages is to secure business insurance that specifically protects your company against such events.