Small Business Resource: Five Steps to Protect Against Fraud

If you’re a small business owner, you’ve likely been warned of the dangers of fraud. As the metaphorical bogeyman of small business, fraud is an elusive yet omnipresent threat that can cost small businesses in big ways. Though the annual fraud rate among businesses has remained relatively stable at 46% according to a PwC report, scammers are constantly reinventing their methods of obtaining secure information.

Small businesses are a favorite target of scammers because they often lack the high-level security protections that larger corporations can afford. While fraud occurs across businesses of all sizes, large losses can have an outsized impact on smaller companies.

Fraudsters can and will continue to prey on small businesses—however, there are simple yet effective steps that you can take to protect your business. Here are five strategies to help you spot and stop small business fraud:

1. Keep track of your financials and review your accounts

Many small businesses check their books at the end of the month—but if suspicious activity is spotted then, it’s often too late. Making a habit of checking your books every day can help you spot fraudulent activity as soon as it occurs, which also gives you the best chance as stopping it in its tracks. If you have suspicions about a transaction, alert your bank immediately.

2. Avoid mailing checks.

A current scamming trend is intercepting and stealing small businesses’ mail in search of checks. Checks are incredibly easy to counterfeit, difficult for banks to detect, and often contain your business’s account information, which scammers can then utilize to create ACHs. An ACH is an electronic fund transfer made between banks and credit unions across what is called the Automated Clearing House network. In short, ACHs are guaranteed funds that don’t require a name check, making them the simplest way for scammers to get access to your account. The fraudster can then use your bank account and routing numbers to initiate payments for purchases or to pay debt by giving these numbers to the desired vendor. The best way to avoid ACH and check fraud is to deliver your mail containing checks to the post office by hand along with frequently monitoring your account activity.

3. Be aware of email scams, such as business email compromises (BECs).

Another popular way that scammers can access your information is through hacking the account of an internal employee. They can pose as the employee and request wire transfers or other changes to the standard methods of payment. If you receive an email from an employee within your organization or an organization you work closely with that makes a strange financial request, call the phone number that you have saved for that individual (not the phone number listed in the email they sent) and verbally confirm their request. More often than not, the individual will be unaware of the request and the fact that they’ve been hacked, giving you the opportunity to stop the attack before any funds are lost.

4. If your business has an internet presence, be wary of large order requests.

Huge, expensive orders of your business’s merchandise should bring a smile to your face—but unfortunately, it can also be a sign of a scam. If a customer places an unusually large order and uses a counterfeit check to pay for your merchandise, you could find yourself out the product and the cash. Take a moment to legitimize the transaction before pushing it through. Be wary of anyone who sends more money than is needed to cover the expense of your product—requests for additional funds to be used for shipping are often red flags, especially when the amount allotted to ship costs more than the item itself.

5. Investigate the resources available to help protect your business.

All small businesses should review their insurance policies and understand what types of fraud protection are offered. In addition to insurance, make sure you are checking the work of your bookkeepers, investing in an anti-virus software for the computer that you bank on, and keeping an open line of communication with your bank. With community banks like Tompkins, the ability to build a meaningful relationship with your banker over time enhances your banker’s ability to assist you with individualized tools and resources. From automated check and ACH debit matching programs to additional protections like payee match, there are a wide range of services available to help you best protect your business.

Mary Dishong-VanEtten is a vice president and corporate security officer at Tompkins Community Bank.