Small business fraud prevention begins with you

Many people believe fraud is just another term for theft. However, the difference between the two is that fraud stems from deception or misrepresentation to make money. It happens more often than you think as the typical organization loses a median of 5 percent of revenues each year due to fraudulent activity. That, in turn, amounts to billions of dollars that belong to American businesses.

Fortunately, you can help prevent common practices by knowing the latest fraud techniques and anti-fraud safeguards. First, it’s important to know that fraud can happen in a variety of ways, including:

• An attempt to gain funds or information by deception or illegally, whether acting alone or in collusion with other parties.
• The deliberate false entry or omission of material information to misrepresent or obscure the facts.

While both large and small organizations fall victim to fraud, companies with fewer than 100 employees are particularly vulnerable compared to their larger counterparts. According to the Association of Certified Fraud Examiners (ACFE), the median loss resulting from fraud was $145,000, with 22 percent of those cases reporting losses of at least $1 million.

Because fraud equals loss, your organization sees the effect in its cash flow and profitability. That, in turn, can affect things like salaries, hiring, product enhancements and technology upgrades. By watching for suspicious activity, you can help prevent a hit to your bottom line. Here are a few trends to monitor:

• Malware on websites - Online merchants usually don’t have nefarious agendas, but hackers can install malware on unsecure sites, which can then be used to steal information entered by consumers. The frequent target? Credit card info.
• Credit and Debit Card fraud – Keep an eye on suspicious customer purchases such as multiple card entries for high-dollar products, billing and delivery shipping information that don’t match or the use of multiples cards for purchases to be shipped to a single address.
• Peer to peer payments – Watch transactions paid through apps like Zelle, which small businesses are using more and more. Ultimately, treat your P2P payments as you would cash and realize it’s never a good idea to accept or send money to people you don’t know.
• Malicious employees – Your workers can be your first line of defense or your weakest link. Last year, a food service employee was reported to have stolen 100 credit card numbers while working the drive-thru. These types of stories are sadly not uncommon. Put policies and procedures in effect to discourage employee fraud.
• Skimming credit cards - It’s one of the most common ways to snatch card data and it comes in a few forms. Among the most common are “skimmers,” which are plastic devices that attach over the top of a credit card processor. Be on the lookout for skimming devices, which are most frequently found at ATMs and gas stations.