When business owners are going through difficult or uncertain times, it can be tempting to focus on revenue generation or innovation. This can seem like the best way to bring more money in. However, these are also times when business owners need to think more concretely about protecting themselves and their businesses from scammers and fraud.
Business fraud occurs when others, either as a group or an individual, commit a crime against a business that benefits these others financially. Increasingly these groups have become sophisticated enough that their fraudulent activity can look like regular business activity, so it can be difficult to catch.
One of the biggest challenges is how business fraud can come from so many sources: customers, suppliers, employees, third parties … the list is almost endless. The fraud itself can take the form of fake transactions or returns, counterfeit money, payroll fraud, identity theft, and false employee compensation claims.
It can seem overwhelming, but there are steps businesses can take to reduce their risk of falling victim to fraud.
1. The Importance of Employees
During the hiring process, make sure that all potential new team members sign permission for background checks and credit checks. These are especially important when a potential new hire will be handling company funds or sensitive data. Aside from background checks, a quick look through the potential employees’ social media accounts can also help give a sense of whether they are suited to your business or if there are any potential red flags.
Employees should always be properly trained in-house on what to look out for in the fight against fraud. This should include information on how to confidentially report any suspicious activity. It is up to the company to foster a climate where any team member feels safe about raising concerns.
Further, no single employee should be able to conduct work without the oversight of another employee. There should be independent checks by other employees in order to reduce the likelihood of fraud and to increase the chances of detection. This is important even in low fraud risk environments since employees will be more diligent if they know that someone else will be checking their work.
2. Fraud Reduction and Internal Systems
It is important to have adequate security software and processes to reduce the risk of cyberattacks. This also means controlling who has access to systems within your business in order to minimize the number of people who can access sensitive data.
Financial processes should also have multiple checkpoints. No one person should be controlling or signing off on financial workflows. Business owners should consider spot checks to ensure that reported information is accurate, whether this means doing it themselves or assigning the responsibility to trusted leaders on a rotating basis.
All internal controls should be clear to all employees. These can take the form of a specific sign-off process for financial information, spot-checks on information and data, or restricting access to sensitive information. If employees are involved in the controls, then they are more likely to take ownership of the process rather than see it as an intrusion.
3. External Considerations
When contracting or looking for new suppliers or partners, do similar checks. Carefully consider the people who will be connected to your company in all ways and not just those who are company employees. If a person or company has a hand in how your own company will be perceived by customers, make sure to do due diligence before engaging with them.
Businesses can also benefit from having fraud insurance. However, these policies are not an alternative to internal control processes. If considering fraud insurance, make sure to read the fine print in order to be sure that your company aligns with expectations so that the insurance will be able to help you should fraud occur.
Many businesses also seek a payment solutions provider in order to protect themselves against payment fraud. These companies should be carefully selected to ensure that they offer the proper payment solutions for your company and that they have the full backing of a well-known bank. Choosing a reputable payment solutions provider can take a lot of initial research, but the benefits can be many.
Businesses do not need to simply hope that they will not experience fraud. By carefully selecting and training employees, as well as monitoring internal processes and external interactions, they can protect themselves against the possibility of business fraud.