Protecting Your Small Business from Fraud: Essential Measures for Every Entrepreneur
As a small business owner, you know that maintaining the financial health and security of your company is of the utmost importance. Fraud can be a serious threat, potentially wreaking havoc on your business's finances and reputation, and it is more common than you might think.
In 2022, the Association of Certified Fraud Examiners’ (ACFE’s) Global Fraud Survey found that the average business loses around 5% of its revenue to fraud each year. To safeguard your business from such risks, it's crucial to understand common vulnerabilities and take preventive measures. In this blog post, we'll discuss some essential steps to prevent fraud in various aspects of your business. It is always easier to take preventative measures than to deal with the consequences of fraud after it has occurred. Some simple preventative steps that you can take include:
Review your Accounts Often.
This may seem like an obvious tip, but many business owners only closely review business accounts quarterly, which is not often enough to spot suspicious activity in time to prevent serious loss. Also, remember that you may obtain a copy of your credit report, free of charge, once every 12 months from each of the three nationwide credit reporting companies. To order your annual free credit report, please visit www.annualcreditreport.com or call toll free at 1-877-322-8228.
Be Thorough in Hiring
Investing time in through screening of potential employees is always worth it. Take time to investigate references and look into the background of people you’re hiring, especially if they’ll be handling cash or sensitive financial information.
Educate your Employees
Your employees should be aware of how to prioritize the financial health of your company, and be aware of fraud prevention measures.
Outline a Clear Code of Conduct
Along the same lines, it can be helpful to outline clearly the employee behavior when it comes to company assets.
In addition to following these steps, it is important to be vigilant about the following common vulnerabilities to fraud: discounts, refunds, gift cards, credit card disputes, cash handling, inventory controls (keeping track of physical merchandise), and closing and opening procedures.
While being vigilant will reduce the risk, the fact is that fraud happens. One particularly devastating type of fraud is identity theft. If you believe that you are the victim of identity fraud, you should immediately contact the Federal Trade Commission. You can get additional information from the FCC about steps an individual can take to avoid identity theft as well as information about fraud alerts and security freezes. You should also contact your local law enforcement authorities and file a police report. It is important to obtain a copy of the police report in case you are asked to provide copies to creditors to correct your records. Contact information for the Federal Trade Commission is as follows: Federal Trade Commission, Consumer Response Center, 600 Pennsylvania Avenue NW, Washington, DC 20580, www.identitytheft.gov, 1-877-IDTHEFT (438-4338)
If you feel that you need more guidance in this area, reach out to us about our fraud prevention module. We have a service available to help you review and assess current fraud prevention policies and practices. We help you:
identify and address internal and external risks
propose mitigation strategies
create employee processes for risk management
ensure appropriate security and risk settings in practice management software
train employees on new processes
Tower Books remains committed to your security and success!