Are you doing all you could be to protect your small business from fraud? According to a study by Bank of the West, while 95 percent of small businesses say they are taking steps to prevent fraud, many are falling short in key areas.
For instance, Bank of the West fraud experts say employee fraud is one of the greatest risks facing small businesses, but fewer than one-third (32 percent) of small business owners have a business insurance policy that covers employee dishonesty or theft. Nearly half (49 percent) admit they don’t conduct regular checks of their business’s financial and inventory departments, and just 18 percent use two-person controls to prevent accounting fraud or embezzlement.
In addition, although data theft is one of the primary risks facing small businesses, fewer than half (48 percent) of small business owners secure their confidential documents or data appropriately, whether in digital or print form.
Small business owners are also at risk of payment fraud. More than six in 10 (61 percent) of companies have experienced payment fraud, according to the AFP Payments Fraud and Control Survey, but the Bank of the West study found just one-third of small businesses use centralized payroll and approved vendors, while just 30 percent use fraud prevention services such as ACH Positive Pay, ACH Block, Stand Alone Positive Pay or Reverse Positive Pay.
Small business owners who have previously been victimized by fraud are more likely than those who haven’t to be worried about the potential for fraud. They are more likely to take steps to prevent it from happening again. Sixty-two percent of victims vs. 45 percent of non-victims are “extremely” or “very” worried about fraud. Half of victims vs. 32 percent of non-victims say they will take additional steps in the coming year to prevent fraud.
If you think your small business is too small for criminals to bother with, think again. In fact, according to the Association of Certified Fraud Examiners (ACFE), small businesses are the most common victims of fraud. They have the highest rate of fraud (31.8 percent) of any business size category and also suffer the largest median losses. A theft that might just cause a hiccup to a Fortune 500 firm can wipe out a small business.
What can you do to prevent business fraud?
- Use two-person controls in your accounting department to ensure that no one person is trusted with funds without others being able to see what he or she is doing.
- Use appropriate cybersecurity tools as well as physical tools like locked file cabinets to secure confidential business and customer data.
- Create company policies about remote work, email use and Internet use that protect your networks, computers and sensitive data.
- Make sure that employees read, understand and abide by your company fraud prevention and security policies.
Taking a few simple steps can protect the business you’ve worked so hard to build—and prevent you from facing loss and regrets.