Introduction
It is quite unfortunate that many small businesses are at risk of online scams from fraudsters, trying to extort them of their hard-earned money, personal or business identification, and so on. Sometimes, these scammers pretend to be a governmental agency or a well-known company to accomplish their aim.
As a small business owner, you are responsible for protecting your business from falling for these frauds. One way to do this is by having security measures in place to protect your financial transactions. Unfortunately, a survey showed that 82% of businesses still experience fraud every day. So, how can you protect your small business from scams?
This article will cover some common small business scams you might face and several ways you can protect your business from them.
Key Takeaways
- Small businesses are more likely to fall victim to fraud, so it is wise to implement a fraud detection and prevention strategy early in your business.
- When hiring employees, make sure you conduct a proper background check. Do not allow just anyone to work in your small business.
- Fraud can damage your brand’s reputation, which will, in turn, affect sales.
Common Scams Your Small Business Might Face
It is important to know what to expect. This will help you avoid falling victim to these scams. Some of these small business scams include:
- Cash theft
- Payroll fraud
- E-banking
- Invoice emailing scams
- Fake invoicing
Cash Theft
Money has a way of being unstable in a small business. Whether it is through your employee failing to report a sale, or when your employee releases funds that haven’t been authorized by you (fraudulent disbursement), cash theft can negatively affect your business growth. At the onset of establishing your firm, you must have a cash management and monitoring strategy in place. Doing so will enable cash supervision in your business.
Payroll Fraud
Payroll fraud affects about 27% of businesses and this happens more frequently in small businesses. Small business owners must understand how payroll works and get a professional to assist them in their bookkeeping. As your business grows, payroll becomes more complicated. Having knowledge about how this works will protect your business from online fraud during such times.
E-Banking
As online banking becomes more prevalent, e-banking frauds have also skyrocketed. As a small business owner, you must ensure that you outsource an accounting firm or hire a professional accountant to monitor your online transactions. Cybercrime is so popular today and if you are not careful, you might fall for scams without realizing it.
Invoice Emailing Scams
These small business online scams are carried out by fraudsters who pose as legitimate companies and advise your business on some payment changes (they pretend to be your bank or a vendor you do business with and ask you for some financial information). You might not detect it as fraud until it is too late. They can use phishing email addresses of legitimate companies and you might not deduce which from what. Constantly cross-examine emails you receive that look out of order. There are several ways to identify phishing emails from real ones.
Fake Invoicing
Small business owners need to choose a reputable supplier for his/ her business. This is because fake invoices have become a popular small business scam method. If you choose a fake supplier, you might lose a lot of money.
Ways to Protect Your Small Business From Scams
There are several ways you can do this. Here are some key ways to give your small business protection:
- Educate yourself
- Educate your employees (if any)
- Carryout employee background check
- Protect your bank accounts and credit cards from scams
- Integrate an IT infrastructure
- Use a dedicated computer for your small business banking
- Place insurance and bonds on your business
- Have clear and concise policies
- Seek help
- Keep accurate account records
Educate Yourself
Having knowledge has been likened to having power. Therefore, it is important for you to know how you can protect your small business from online scams. You need to know what fraud types can target your new firm and how you can either avoid or avert this.
Some of these small business scams have already been well explained in this article. In different ways, these small business frauds can destroy your entrepreneurship dreams. They can plunge you into financial distress or lead you to lose valuable talents and customers. Overall, your reputation may be ruined and you might never have the chance to open a business again.
Educate Your Employees
If you have employees in your small enterprise, the wise thing to do when inducting or onboarding them is to train them on important security measures. Make sure that you inform them of some common small business scams and how they can prevent them. You need to imbibe respect for confidential information from your employees. Failing to handle the private data of the firm the right way can lead to many problems.
Carryout Employee Background Check
Another vital way to protect your business from fraud is to make a good hiring decision. Before employing any individual, look beyond skills and conduct proper background research on the individual. Pre-employment background checks are extremely important for business owners, especially if your staff consists of employees that handle cash, expensive merchandise, or access private financial or customer data.
Protect Your Bank Accounts and Credit Cards from Scams
It is important that you protect all your bank accounts and credit cards. This will ensure that scammers do not gain access to your money. One way to do this is by separating your personal bank accounts from your business ones. This way, fraudsters will not take ALL your material possession. Separating the accounts also helps you to track your business expenses better.
Using your credit cards wisely is a fine way to protect them. Do not hand your card number to anyone you do not trust or know. If possible, use other alternative online payments instead of cards. Always ensure that you check your e-banking app every day to notice suspicious activities on time.
Integrate an IT Infrastructure
Every small business owner must invest in an IT infrastructure strategy. This involves having antivirus, spyware, and malware detection software to protect sensitive information on your computer. You must also have a dedicated cloud server to back important information should there be a cyberattack.
Use a Dedicated Computer for your Small Business Financial Transactions
It is important that you use a dedicated computer for your business transactions. Using the computer you use for social media or other web activities for your financial transactions might pose a big risk. Ensure that you avoid this completely.
Place Insurance on Your Business
Cybercrime has become so popular that it might happen at any time. This is where insurance comes in. Make sure you place an insurance policy on your business. This will protect you from any loss that you incur from fraudulent activities.
Have Clear and Concise Policies
Without having clear policies in your business around scams and thefts, your employees might not know how severe scams are on a business and what the implications will be.
For example, simple actions like taking pens or an unused laptop from the firm can be serious. When there are clear policies on ‘borrowing’ from the firm, employees will avoid any action (big or small) that is incriminating.
In your business policies manual guide, make sure you state your clear expectations of your employees. Let them know what is considered theft and fraud and what the implications are for disobeying the policies. The policies must cover all important things from the stealing of supplies from the business to serious fraudulent account activities.
Seek Help
Several online scam management solutions help small businesses identify and manage fraud risks. These solutions are provided by fraud management companies to help small businesses with the right software that can evaluate their fraud risks.
The following are some reasons you, as a small business owner, need a fraud management solution:
- It can help you create plans that will help you improve your business success. It helps you to handle critical information and store them for the future.
- It can help you to determine what type of fraud occurred, what caused it, and how to prevent such from happening. Prevention of fraud involves gathering information and analyzing the data to determine the cause of the problem and how to solve them.
Keep Accurate Account Records
Most times, as a small business owner, you need to exert yourself to keep everything in your business moving. One thing you must keep organized is your account records. For instance, without having a detailed bookkeeping record, products can disappear from your inventory without your notice.
Here are some ways to make sure your small business records are accurate:
- Your small business’s security and safety depend on how your firm handles important documents. Ensure that you save all important documents on a secured cloud server.
- Do not post private information online unless you use a secured server. Fraudsters are roving around the internet space, looking for who to scam. If they get your phone number or email address, they can easily get other important data from your small business too.
Benefits of Protecting Your Small Business from Scams
So how will your business benefit? Here are key ways it will benefit from scam prevention:
- You get more sales with better customers
- You protect your small business reputation
- Less requirement for a merchant’s account reserve
- You improve customer satisfaction
You Get More Sales with Better Customers
One benefit of scam prevention is that you easily detect bad customers, i.e., fraudsters that pretend to be customers and swindle you instead. Once you identify scammers, you can take steps to avoid them and direct your sales and marketing to good and legit customers.
You Protect Your Small Business Reputation
Fraud can cause a lot of damage to your brand’s reputation. When a brand is in the news for fraud, the reputation of the business is severely damaged. People will complain about its services and sales will plummet. All it takes for all this to happen is one scammer breaking into your customer’s account. Angry customers affected by such scams will leave terrible online reviews and prospects will see these reviews and avoid your business. To avoid this scenario, ensure that you implement a fraud prevention strategy in your small business.
Less Requirement for a Merchant Account’s Reserve
A merchant account reserve is money that your bank or payment processor keeps aside for emergencies. This money is like collateral for a secured loan. If your small business merchant account has a reserve, it means that the acquiring bank or payment processor thinks you are a risky client. Being risky means that your business is prone to fraud and you do not take steps to mitigate it. If you reduce your fraud risk, you prove to the bank or payment processor that you are not risky and they will in turn reduce the requirements set on the merchant account’s receive. This will in turn bring in more revenue for your business.
You Improve Customer Satisfaction
Your customers will only become loyal to your brand if you show them that you care and improve their satisfaction. They will be happy to open accounts in your e-commerce store, collect loyalty points, and purchase your products. But if you become a victim of online scams, they will stop trusting your services.
For instance, if a scammer gets into your customer accounts and steals all their loyalty points or their contact information, the customers will surely not blame the scammer for breaking into the account. You will be the one to be blamed for not protecting your business website efficiently. Some of your customers can quickly lose their trust in your brand and stop buying from you.
But by putting scam detection and prevention strategies in place, you stop fraudsters from breaking into your website and stealing important customer information. Thus, you improve customer satisfaction.
Conclusion
As online business scams become more and more prevalent in our time, it is important to set the proper defense to protect your firm. Educate yourself and your staff on the fraud types to look out for and how to prevent and protect yourselves. One of the common places to become a victim of business fraud is the internet. Follow helpful online security tips to protect your small business. Doing all this will give you peace of mind that your business is safe from fraudsters.
Frequently Asked Questions (FAQs)
What are some common small business frauds?
Some of the common online scams include:
- Cash theft
- Payroll fraud
- E-banking
- Invoice emailing
- Fake invoicing
It is important that you know these online scams and take steps to prevent and protect your enterprise.