Although all businesses are vulnerable to fraud, smaller businesses are much more susceptible. The effects of fraud are also magnified in a smaller business, and this is why every business should be aware of how fraud happens and find ways to ensure it does not.
Enhance Hiring Procedures
Although every business seeks to hire honest employees, that is usually not so easy to do. A few bad actors can get through the screening process, and these are the people most likely to commit fraud. Bolstering the hiring process through background checks is one way to ensure you hire the right people. These background checks should ideally be targeted at people who will be handling cash and accounting.
Stagger Accounting Duties
Many small businesses have only one person handling their accounting. This makes it easy for fraud cases to go unnoticed because that one person is better able to cover it up. Staggering accounting duties by having different people working on the books at any one time could help prevent fraud. These people should interchange and, if possible, never interact to avoid collusion.
Know Your Business Partners
Before forging any business relationships, it is important that you know the basics about the other business. This is especially important if you will be sending them invoices for delivered goods and services. Knowing their location, if they are a real business, as well as how long they have been in business are all good ways to verify that they can be trusted.
A simple web search can reveal all these and more details. Additional resources include checking them up on the Better Business Bureau or your local commerce department. The downside of using these methods to verify that the business is what it says it is, is that they are all manual methods that take too long. Now, there are automated business verification systems that can let you do this in a few seconds. Cognito HQ provides such services, which allow for secure and real-time verification of addresses, web presence, incorporation and other business details. A business report from Cognito also reveals any red flags that will help you avoid fraud by exposing a business’s high-risk characteristics.
Check the Accounts and Books Regularly
Online banking has saved so many businesses from fraud as you can now view all your business information wherever you are. If you do not have this implemented yet, it is a good idea to check on your accounts regularly. Also, check all physical documents to ensure they have not been tampered with as these dictate what will be entered on a digital system.
Routine audits are also a potent tool that helps businesses avoid fraud. Businesses should audit departments and areas that deal with cash, product returns, refunds, accounting, and inventory management. Non-scheduled audits can also help detect fraud by removing the predictability of when these audits happen.
Protect Credit Card Information
Credit card fraud affects businesses of all sizes, but it is especially painful if personal and business finances are entangled and the credit card details for such an account are breached. To minimize losses, always have separate business and personal finances.
Also, take measures to protect your customers’ credit card information to ensure they do not fall victim.
Every business should implement fraud protection. These protections should protect the business, the businesses they deal with, as well as their customers. If any of the measures you come up with do not seem adequate, you might have to hire a professional to look into your business and help put the right measures in place.
HR Future Staff Writer, United Kingdom.