10 Steps You Need to Know

Your company's future hinges on your ability to make sound financial decisions and protect against fraud. Failure to spot fraudulent payment activity can be particularly damaging to small businesses that do not have the financial resources to recover lost revenue. With a proactive approach to fraud, you can help safeguard against the sting of lost revenue. Below are 10 steps to help protect your business against fraud.

1. Increase Fraud Awareness

Raising awareness among employees of fraud and its devastating effects is the first and most important step in a fraud prevention initiative. Many employees are not aware that fraud exists, or how a single act of fraud can impact their jobs or paychecks. Employers should explain how payment fraud can potentially lead a business to close its doors and personally affect every employee. In 2015, 43% of cyber attacks targeted small businesses. A dramatic increase from 18% in 2011. 

2. Fraud Prevention Initiatives

Fraud prevention should be addressed with all new employees to ensure that they understand fraud's devastating effects. Employees who work in sales, accounting, and purchasing should receive in-depth training on how to spot fraudulent payment activity and prevent its occurrence. Only 14 percent of small businesses rate their ability to mitigate cyber risks, vulnerabilities and attacks as highly effective.

3. Know the Tell-Tale Signs of Fraud

Employees should be trained to recognize the warning signs of fraudulent payments. Here are a few indicators that a transaction could be fraudulent:

• A new customer wants to place a large order yet seems to know nothing about your products
• A new customer wants you to ship a large collection of items out of the country immediately
• A new customer sends you a check for an amount that does not match the order total

4. Avoid Stolen Cards

Ask new customers who wish to pay by credit card to complete an authorization form. Customers can submit a completed authorization form along with a scanned copy of the front and back of the credit card and a copy of the customer's passport or driver's license. This measure helps to safeguard against the use of stolen credit cards.

5. Identify Inconsistencies

Check the customer's shipping address for inconsistencies. Delivery addresses that are inconsistent with a purchaser's contact details are often indicative of fraudulent activity. For instance, if a buyer claims to be with the Cleveland Clinic but requests that an order ship to an abandoned warehouse in Miami, you may wish to investigate the clients a bit further before dispatching an order.

6. Bank Wire Transfers

Consider requiring payment by bank wire transfer for new customers. A surefire way to safeguard against fraudulent checks and stolen credit cards is to encourage customers to pay by bank wire transfer. While this may not be a good strategy for businesses that generate a large number of sales for modest dollar amounts, it is appropriate for companies that produce a modest number of annual sales for high ticket items. 60 percent of small companies go out of business within six months of a cyber attack.

7. Ship Only after Payment Received

Delay order shipments until payments by check clear. While there is no definitive or universal time frame to use when waiting for checks to clear, small businesses should refrain from immediately dispatching costly orders to brand new customers who pay by check.

8. Red Flag for Hasty Purchasing

Be wary of new customers who want to place large orders quickly without negotiating. Most serious customers will engage in a bit of price shopping or ask about the possibility of a bulk discount before paying up front for a large order. Employees should be trained to investigate new customers who suddenly remit a large payment by check or credit card without any discussion, as this could signify fraud.

9. Identify Suspicious Checks

Ask your bank to review suspicious looking checks. If you receive a check that you feel may be fraudulent, you should contact your bank right away. An authorized individual with your bank can inspect the check to determine whether it is legitimate or fake. 

10. Utilize Fraud Prevention Specialists

Enlist the support of a trusted fraud prevention specialist. One of the best ways to safeguard against fraudulent payments is to seek the guidance of an experienced accounting solutions provider. By seeking the support of an industry expert, you can make sure that your company receives comprehensive training on fraud prevention. Cyber crime damage costs are expected to hit $6 trillion annually by 2021.

If you're concerned with protecting your business against fraudulent acts and want to learn more on how to prevent these types of risks, view the free recording of our webinar "Stop Fraud In Its Tracks." Platinum Group's Human Capital Management and Business Enrichment Webinar Series features local and statewide professional experts offering valuable insight into successful business practices. 

Platinum Group is a full service human capital management (HCM) resource that allows businesses to manage their payroll, benefits compliance, track time and attendance and other various human resources functions in a way that maximizes efficiency and eliminates redundancies with the platform, iSolved. For more information about Platinum Group or to schedule a demo of iSolved please visit our website.