Credit fraud is on the rise and the impact it’s having on small businesses is significant. According to a recent survey by Javelin Strategy, 8.8 percent of small business ownersexperienced fraud incidents in 2011 while only 4.7 percent of those surveyed who were not business owners were the victims of fraud.
Preventing Fraud for the Sake of Your Business
Small business owners do, however, hold some of the responsibility for their overall vulnerability when it comes to fraudulent activities. An ounce of prevention is often worth a pound or more of cure. Here are a few steps you can take to prevent fraud from having such a profound impact on your business now and in the future.
1) Conduct background checks prior to employment. You want to especially be on the lookout for previous convictions relating to theft and/or fraud. If the employee will be in charge of or allowed access to company assets you should really consider conducting a credit check (make sure you get authorization from your candidate before doing this of course).
2) Check bank statements and activities daily. Monthly statements won’t allow you to see signs of fraud or misappropriation of company funds until well after the fact. Daily monitoring of company accounts is a better way to be aware of signs of trouble the moment they arise.
3) Change your accounting habits. It’s important to make sure that no one in the company has too much power over the financial dealings of the company. For instance, the person who actually writes checks on the company’s behalf should not also have access to the reconciliation of accounts (i.e. separation of duties). That way there is a trained eye on the lookout for potential harm being done by the person who actually writes the checks for the business.
4) Educate your employees about fraud prevention. This is your first line of defense against fraud. Your employees are your greatest asset and they have a vested interest in protecting the interests of the business. Show them what to look for and give them a chain of events to follow if they see suspicious behavior.
5) Require employees to use their vacation days. – Oddly enough, it’s the vacation of most employees that brings shady dealings to light. When the employee isn’t there to misdirect attention away from his or her sleight of hand, it’s much easier for that employee to get caught or, at the very least, to sound the alarm about potential problems.
6) Invest in cyber liability insurance. You can’t plan for every potential problem. It doesn’t matter how well prepared you may be. The things you can’t prevent by taking a few simple precautions are the things you’ll want to have cyber liability insurance to cover. If the worst case scenario does happen, you want to add this layer of protection to help safeguard your business.
You don’t have to move mountains to make your business a less interesting target for those who would do you harm—especially in areas like credit fraud. These simple steps will get you started on the right foot. But you must put them to work sooner rather than later to lower the risk of credit fraud impacting your business.