As featured on sba.gov, the Association of Certified Fraud Examiners reports that small businesses lose about $155,000 each year as a result of fraud, and have a higher fraud rate than larger companies and non-business owners.
You’ve put a lot of work into getting your business up and running, and the last thing you need is to fall victim to small business fraud. Reduce your risk for this type of crime by following these six tips:
- Choose your financial organization wisely: Run a Google search on “small business loans,” and you’ll get hundreds of options for financial products. Sometimes, these are actually phishing scams from less-than-reputable sources, designed to get your company’s financial information in order to fraudulently access your bank accounts or open new credit card accounts in your company’s name.
Before handing over any financial information, carefully review the bank’s website to learn more about its history. It’s also a good idea to make sure a bank is FDIC insured, as well as to check its Better Business Bureau rating.
- Run a background check on all prospective employees: Unfortunately, many cases of business fraud come from within the organization. A good way to avoid this is by running a background check on all prospective employees. This is especially important if the person will handle cash or work with sensitive financial or customer data. You may want to consider credit checks, drug tests, speaking with past employers, criminal background checks and looking at driving records. To learn more about the types of background checks you can legally conduct, read the Small Business Administration’s Guide to Employee Background Checks. And for more tips on finding the right employee for your small business, check out 5 things to consider when hiring your next employee.
- Secure your computers: Protect your computers from viruses and other malware by installing a firewall, as well as anti-virus, malware and spyware detection software. Then, dedicate one computer for all financial transactions.
Additionally, refrain from using the same computer for your business’ social media, email and Web browsing activities, as it may make you more vulnerable to fraud.
It’s also a good idea to institute a password policy. For example, have employees change their passwords every 60-90 days and avoid using easy-to-hack passwords, such as 1234. The best passwords generally contain at least one uppercase letter, one number and are at least eight characters long.
- Maintain checks and balances: Carefully review all invoices and other financial statements to make sure the numbers match up. If there are any discrepancies that can’t be reconciled, it may indicate employee theft or fraud. If you believe an employee has committed fraud, the National Federation of Independent Businesses suggests investigating the situation first to avoid wrongly accusing an employee, which could lead to adverse legal action.
- Obtain insurance against crime and fraud: Despite your best efforts to protect your business, there is still a chance fraud could occur. Consider purchasing an insurance policy that will protect you against losses from fraud. Many policies are affordable, and the investment may save you a boatload in the end.
- Understand your bank’s policies: Be sure to read your bank’s security and privacy policies so you know how they are protecting you and how you need to report fraud, should it occur. And be sure to ask about and understand the services and benefits available to address fraud, such as coverage of unauthorized charges and fraud monitoring and alerts.