Ten Tips on Fighting Small Business Financial Fraud
Make fraud prevention a strategy rather than a reaction.
1. Use dual controls
Never have one person writing, receiving and reconciling your business accounts. If you don't have the staff to add a second person, consider using an automated banking service to add dual control.
2. Eliminate paper checks
The more checks there are circulating for your company, the greater the chance they may be intercepted, duplicated or manipulated by a fraudster.
3. Establish review procedures
If you must use paper checks, establish internal procedures to review signatures and only use laser printed checks with security features. Secure the signature plates or severely limit access to any digitized signatures. And secure the checks somewhere else—behind lock and key.
4. Use Automated Clearing House and direct deposit
Automated Clearing House, or ACH, allows your creditors to automatically debit your business accounts. With direct deposit, you eliminate checks written to consumers for payroll, reimbursement and insurance. Both tools can help prevent criminals from gaining access to accounts and from altering or counterfeiting checks.
5. Check accounts often
Go online early and often—even daily—to detect anything that doesn't look right. The earlier you report suspicious activity to your bank, the greater your likelihood of minimizing fraud losses.
6. Establish a lock box
If you have a hundred accounts sending you a check every month you have a hundred opportunities for financial fraud. With lockbox, all checks are directed to a third party—eliminating the fraudster's opportunity. Ask your banker about how to set one up.
7. Conduct background checks
Many state tort laws have been reformed and consider a failure to conduct a background check on new hires a lack of due diligence. You can contact your state's department of law enforcement and order background checks for less than $50 in most cases.
8. Know your bank's policies
How many days before you can see an electronic check image online? How are tellers trained to prevent check cashing fraud—and what electronic tools do they use? Ask your banker for an evaluation of your needs and their services.
9. Establish a fraud hotline
According to the Association of Certified Fraud Examiners, companies with fraud hotlines cut their fraud losses by approximately 50% per scheme.
10. Report fraud and support prosecution
If you suspect fraud, notify your bank and state department of law enforcement immediately. Speed counts in combating electronic fraud—so always try to stay aware and a step ahead. If you find you've been a victim, support the prosecution of financial fraud.
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