How fraud can impact your business and six simple ways to combat it.

How fraud can impact your business and six simple ways to combat it.

by Digitalknowledge in Knowledgebase on May 27, 2022

How fraud can impact your business and six simple ways to combat it. The theft of money from a business is fraud. It may occur directly through actual theft, or indirectly through the misuse of time or resources. Regardless of the size of your business, fraud can have devastating consequences, highlighting the significance of fraud awareness and support.

How fraud can harm your company
The consequences of fraud can be widespread. They may consist of:

Financial difficulties result from the loss of money or goods, as well as the expense of cleaning up after the incident and implementing preventative measures.
Short- and long-term harm to your and your brand’s reputations.
Enhanced accounting expenses. You may have to pay more to have your accounts audited, and you may be subject to additional scrutiny from regulators, both of which increase your consultant costs.

Upon learning of the incident, funding sources will reduce their income.
disruption or sabotage of digital resources.

The necessity of terminating employees who perpetrated or failed to detect fraud.

Knowing that fraud could potentially cause issues for your business is one thing, but what can you do to prevent it from occurring?

  1. Understand your employees.
    Even if your company is small, you can never be too careful when hiring employees. Conduct extensive background checks on everyone who will ever handle cash or manage customer information, increasing the scrutiny as each individual’s level of financial responsibility rises. When accounting personnel are on vacation, use this time to inspect their work to ensure everything is in order.

2. Spread out accounting responsibilities.
Delegating all bookkeeping, invoicing, and petty cash tasks to a single employee may seem logical for a small business, but doing so leaves you vulnerable to embezzlement and fraud. A better option is to divide the responsibilities between two individuals or to outsource them to a third-party CPA firm.

  1. Implement anti-fraud policies and procedures.
    All businesses should have internal control documentation in place. These should include details such as access permissions for financial and customer data, multi-employee approval for accounting or payroll functions, periodic reviews of audit logs, cyber hygiene, and fraud awareness training, among many others.

4. Monitor business bank accounts
Due to online banking, you now have prompt access to account information. Ensure they are consistent with the paper statements you receive by periodically examining them. Be wary of missing or out-of-order checks, checks signed over to unidentified third parties, and unknown payment recipients.

  1. Train your employees.
    Employees may overlook red flags pointing to a coworker or customer fraud if they are not taught the signs of fraud beforehand. Create and regularly implement a comprehensive training program that covers fraud indicators, how to prevent fraud and the protocols for reporting suspicious activity. Ensure that all employees are aware of the direct and specific consequences of fraud.

6. Maintain separate personal and business accounts.
As a business owner, you must take every precaution to protect credit card information. This requires maintaining separate and distinct personal and business accounts.6. Obtain and maintain PCI compliance.
Work with your merchant services provider to ensure that your payment processing hardware and software are compliant with the Payment Card Industry Data Security Standard and up-to-date (PCI DSS).

Fraud is a risk with which every business must contend. However, it can be mitigated if you cultivate a culture of awareness in which a firm commitment to providing advanced payment security solutions, processes, and training is a top priority.

Categories: Knowledgebase

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