Many business owners, particularly new ones, don’t spend much time thinking about small business credit card fraud. But if your business sells online or through the mail, you may be more vulnerable to loss because of fraudulent credit card orders. In North America alone, business lost roughly $2.7 billion in 2010 due to online fraudulent credit card orders, according to Cybersource Corporation, a payment management company.
1) Learn how to spot fraudulent orders. Suspicious sales can be related to particularly large orders made through the web without any direct contact with the customer. Rush orders for high-quality, large quantity goods are another red flag. In this case, the crooks often ask for the items to be shipped overnight. While gifts may be the reason for a billing address being different than the shipping address, it may be a cause of a raised eyebrow. In other cases, the billing address may not match up with the address on file with the credit card company.
2) Require credit card address verification (AVS) and card code verification (CCV). Whether online or through mail order sales, for all sales in which the credit card is not present, require the use of AVS and CCV.
3) Call the phone number on the order. If a would-be crook is placing a fraudulent order, chances are he listed a fake phone number.
4) Use a fraud detection service. Fraud detection services can block suspicious transactions based upon factors, such as origin.
5) Institute checks and balances. For key areas of responsibilities, like money handling and balancing, make sure there are internal controls and separation of duties procedures in place.
6) Conduct internal audits. On a regular basis, conduct scheduled and announced internal audits of accounting transactions, credit card sale transactions, and inventories. In addition to the scheduled audit, be sure to conduct “surprise” audits which will remove temptation and thwart fraud attempts.
7) Conduct external audits. External audits should be employed to conduct regular reviews of company financial accounts, work processes, inventories and contracts. An added benefit of doing this is to make sure you’re in compliance with applicable regulations and laws early on in the life of your business.
Implementing protective measures can help to reduce your exposure to credit card fraud. Taking an extra step or two in the short-run may seem inconvenient and a time waster, but in the end it will help protect your small business from credit card fraud — and financial losses.