4 Ways to Protect Your Business from Fraud

For small and medium-sized businesses, fraud protection is essential to maintaining business operations and minimizing financial losses. According to a 2020 report from the Association of Certified Fraud Examiners (ACFE), U.S. businesses on average, lost $125,000 due to fraudulent acts, with over 21% of those reporting losses of at least $1 million. The study also found that small businesses were particularly vulnerable to fraud, due to a lack of anti-fraud controls and procedures.

For SMBs, taking steps to curtail fraud, can mean the difference between a business that is thriving and one that is close to collapse. While there is no single solution to eliminating fraud risk, there are some specific steps that business owners can implement to protect their business from fraud.

Protect Bank Accounts and Credit Cards

One of the most common methods used by fraudsters to steal business funds is through fake bank accounts and credit cards. To prevent this, business owners should ensure that their business banking and credit card information is always kept secure. This includes using strong passwords, ensuring that any financial transactions are made on a secure device, and only accessing your business accounts from trusted networks.

Beef Up IT Security

Hacking and data breaches are one of the most frequent types of fraud experienced by business owners. To protect your business from this, it is important to have a strong IT infrastructure in place. This includes having robust anti-virus and anti-malware software installed on all devices (including employee mobile devices, if they access business accounts), as well as ensuring that all business data is backed up on a secure server. Additionally, businesses should only be using trusted online applications and tools, to minimize the risk of malware attacks.

Educate Employees

One of the best ways to protect your business from fraud is to educate your staff on the signs of fraud and what they can do to prevent it. This includes ensuring that all employees are aware of the importance of keeping business information secure, regularly updating passwords, and being able to identify suspicious activity.

Segregate Accounting Functions

Another way to protect your business from fraud is to segregate accounting functions within your business. This means that different employees should be responsible for different aspects of the business finances, such as accounts payable, accounts receivable, and payroll. This helps to ensure that no one employee has access to all the business's financial information, making it more difficult for fraud to occur.

Some additional steps small and medium-sized business owners can take to reduce the chance of fraudulent activity include implementing internal controls, setting up anonymous reporting systems for employees, and regularly conducting audits.

Fraud is a serious issue for small and medium-sized business owners. However, by taking proactive steps to protect your business, you can help to minimize the risk of financial losses.