How Small Businesses Can Protect Themselves From Fraud

There are plenty of risks that businesses of any size take on just by existing. Of course, small businesses can often be more vulnerable simply because they may have fewer resources that they can use to deal with the aftermath of a risk not paying off or a threat not being adequately addressed or prevented. Fraud is one of the risks that can pose a serious threat to small businesses (or any other business, really). As such, taking steps to protect against the threat of fraud is vital.

Vet Partners

Depending on how established your business is, you may have a large number of businesses or professionals you partner with, or you may just have a few. These partnerships can be an invaluable resource, but they have the potential to be a vulnerability as well. You’re far more likely to share information with your partners that could leave you less protected from fraud, should one of them try to take advantage of you. That isn’t to say that you shouldn’t form partnerships. Far from it. Just make sure you vet them thoroughly before you agree to work together. Perform background checks, do thorough interviews, talk to people who know them and have worked with them in the past, and take the time to get to know the people you’re considering partnering with.

Protect Bank Accounts

Virtually every business has at least one bank account. They’re something of a necessity for businesses. Some small businesses, especially those organized as a sole proprietorship, may have business bank accounts that are integrated with the personal account of the business owner. This is inadvisable, to say the least. If the bank account were to be targeted, you could be left with nothing. It’s far better to completely separate your personal and business accounts. Beyond that, having a separate bank account that is solely for your business makes it far easier to track income and expenses. This should make it easier to identify fraud and simplify the process of claiming deductions on your taxes.

Buy Insurance

Even if you’re sure you’ve done everything you should to protect your business from fraud, you still may find yourself a victim. You don’t want to be left dealing with the financial fallout from being defrauded alone. You can provide your business with helpful protection by carrying an insurance policy that will protect your business financially if you fall victim to fraud. As with any insurance policy, make sure you carefully read through the policy and ask any questions you have about it so that you can be sure that you understand it completely. That is one of the best things you can do to make sure that you have coverage that will be adequate for your needs if you ever find yourself filing a claim.

Cybersecurity

In today’s increasingly technologically dependent world, cybercrime runs rampant and can cause a world of trouble for a small business. Solid cybersecurity plays an important role in protecting you from cyber criminals who would otherwise be able to easily target your business and defraud you. You’ll need to have security systems that are up to date and may occasionally need the help of IT experts to give your security a bit of a boost. Of course, not every small business can afford to retain the services of a full time IT employee, but that doesn’t mean you have to go without. Outsourcing can help protect your business from IT threats.

Background Checks

While some businesses find themselves being targeted by fraudsters who have little to no connection to them, others find themselves being victimized by their own employees. Depending on the type of fraud and where the crime was committed, it could either be considered a misdemeanor or felony, and may be a state or federal crime. Because of this, it’s a good idea to do a background check on your employees. You may need to look specifically for both felonies and misdemeanors in order to uncover this type of crime. Ultimately, the decision of who to hire and who to not hire is up to your discretion, but you might want to think twice about hiring someone who has been convicted for committing fraud in the past.

Password Policies

As you search for and address vulnerabilities within your company, one of the things you should look into is the standards to which you hold company and employee passwords. You may find that you don’t actually have a password policy at all. If that’s the case, fix that immediately. Strong passwords can help protect bank accounts and other sensitive information that could otherwise be used to compromise your business. Require passwords to be changed on a regular basis and for them to be strong and complex. It’s also a good idea to require different passwords for different accounts. That way one account being compromised doesn't compromise the rest of them.

Audit Your Company

The best defense against fraud just might be a solid offense. It’s a little more difficult to become a victim of fraud if you’re constantly watching out for it. Audit your company’s accounts and finances on a regular basis. This can help turn up discrepancies that could indicate that you’re being defrauded. It may be beneficial to have an outside agency handle the auditing process to keep things as impartial as possible. If you suspect you’ve become a victim of fraud but aren’t quite sure where it’s coming from, require people to use their vacation days. It can be a lot more difficult to continue to defraud a business when you aren’t actually there.

It’s crucial that your business take steps to protect itself from fraud. Just because you’re a small business that may not be a household name doesn’t mean that you aren’t vulnerable or that you won’t be targeted. In fact, the very fact that you are a small business that could be more vulnerable to attack could mean that you’re a more desirable target. You owe it to yourself, your business, your employees, and your customers to do your due diligence and take measures to protect your business from fraud.

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