Fraud is a serious crime that can have devastating effects on any enterprise, but it can prevent a small business from recovering. In fact, it’s estimated that 60 percent of small business fraud victims don’t recover any of their losses. Every organization should have a plan in place, but research has shown that small businesses are less likely to have anti-fraud controls. Here are four ways small business owners can minimize the likelihood of becoming a victim of fraud.
Depending on how many computers your small business owns, investing in anti-virus software initially could be costly. However, it will provide internal and external fraud prevention, which will save you money in the long run. Plus, most anti-virus software packages will fit the needs of a small business. The key is to ensure that these packages stay updated so you’re always protected.
Set Up Alerts
Work with your credit card company and banks to set alerts every time there’s activity on your account. For example, you can have the credit card company send you an alert every time the card is used. You can also work with your bank to set up alerts on checking and savings accounts. Also, if your business is considered high risk like a pawn shop, check cashing services, or you have a high turnover rate, then you’ll want to invest in a charge-back prevention program.
Charge-back prevention programs work quickly to identify and flag fraudulent prone accounts and save you money by reducing your charge-back fees.
Get to Know Your Employees
Fraudulent predators often operate externally, but some attack from the inside. That’s why you need to know your employees. Types of employee fraud include expense report and inventory fraud. It’s therefore important for you to get to know your employees professionally and to be involved in their daily activities. This can help you spot any behavior changes that may escalate to the potential for fraud. For example, if an employee is feeling unappreciated, this could cause them to commit fraud for revenge.
Also, treat employees like employees and not like family members or confidants. For example, you might have a small business with only 10 workers and you’re all very close. But you’ll still want to keep things such as passwords and credit cards guarded. Other ways to prevent employee fraud include establishing an employee expense policy, making sure original receipts are submitted and not copies, and periodically reviewing expenses.
Have a Good Understanding of Your Protection
Talk with your bank and credit card companies to confirm that you have a good grasp on your fraud protection plans. You’ll want to know what the process is if you fall victim to fraud and what type of insurance protection is available. Also, you’ll want to understand if you have true insurance protection versus remediation; remediation may cover your attorney fees, but your out-of-pocket cost could be astronomical.
Remember, fraud can happen at any time. You need anti-fraud measures in place to protect your small business.