Did you see the movie “Catch Me If You Can” starring Oscar winner Leonardo DiCaprio?
Leo portrays Frank Abagnale, Jr., a master of deception and brilliant forger. The now 70-year-old gentleman who’s turned his life around to the process of preventing fraud. For example, it’s important to buy the right copier for your small business. If you use the wrong kind, it may not necessarily create an issue. It could, however, create a situation where sensitive information gets into the wrong hands.
And according to a report from the Association of Certified Fraud Examiners (ACFE), “It’s estimated that the typical organization loses 5% of annual revenues to fraud. Of the three major categories of occupational fraud, financial statement, financial statement fraud at $975,000 caused by far the greatest median loss per scheme.”
The time is now to protect your small business from fraud! Don’t wait until you lose everything and have to start over.
Top Small Business Fraud Prevention Techniques
Create a Hotline for Whistleblowers
You want ethical employees working for you, right? Most employees want to do the right thing. However, they may be scared to blow the whistle on unsavory business practices, especially when they’re conducted by upper management. Create an employee hotline and receive alerts about potential fraudulent activities in your small business.
Educate Employees on Fraud Prevention
Your employees can’t help you with fraud prevention if they don’t know what to look for. Implement regular training sessions for all employees about online and offline security threats and prevention procedures. Guide your employees on the proper use of handling and processing company confidential information, includes financial data, personnel and customer information.
Develop Hiring Policies
Your small business can benefit from employee hiring guidelines. When you hire staff, conduct background checks and ask for references. Verify educational and employment histories. You may also consider checking credit scores. Include an employee evaluation process within performance reviews to ensure compliance with company fraud prevention programs, ethics, policies, and procedures.
Get Internal and External Audits
Continuous auditing, monitoring, testing, and validating your small business’s controls, financial data and systems and processes can help prevent fraud. Not only can you perform quarterly internal audits, but your CPA can conduct a year-end audit. You may even consider surprise audits, which can catch unscrupulous employees and business partners off guard.
Protect Customer Information
Most accounts receivables systems have an option to hide customer credit card numbers. You can also set an ‘Authorization Required’ for amounts over a specific dollar amount. An authorization will be needed when the transaction exceeds the threshold. However, make sure you understand the laws around protecting and retaining customer financial information before you accept debit and credit cards.
Protect Data Files
Incorporate permissions within your system to give employees access to data they should see. Make sure sensitive information is only available to those within Payroll and Human Resources. Test your system periodically to ensure fraud is being prevented.
Safeguard Your IT Infrastructure
Every business owner should invest in a solid IT infrastructure consisting of a firewall, anti-virus, malware and spyware detection software. It’s also important to backup data for many reasons, from having records in the event of a cyber-attack to maintaining information.
Secure Company Bank Accounts and Credit Cards
Stolen bank account and credit card information is common. Only give account information to employees who may need it, i.e., an administrative assistant who books your travel. Use online bill pay and/or store paper bills securely. Get a safe mailbox for receiving and sending bills (or allow a trusted employee to handle), or use the post office. Finally, check online back accounts for irregular activity.
Are You Ready to Declare War on Fraud?
Implementing fraud prevention techniques can significantly reduce the chance of fraud occurring within your company. The sooner fraud indicators are available, the greater the chance of recovering losses and addressing flaws within systems and processes.
Keep in mind that employees who know detection techniques are in place, and that experts are monitoring fraud, may be less likely to commit the crime because they may have a higher likelihood of being caught.
To protect your small business from internal and external sources who may commit fraud, strengthen your internal control policies, processes, procedures, and systems now! Take advantage of the latest technologies and maximize your fraud prevention program.
Has your small business experienced fraud? How did you find out about it? What did you do to resolve the issue? Let us know in the comments.
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