Contrary to popular belief, large-scale organizations aren’t the only ones susceptible to scams. Fraudsters frequently target small businesses for their deceptive schemes, too.
Smaller enterprises have fewer resources and budgets to anticipate and fight common fraud. This makes them extra vulnerable to bad actors. If you’re a small business owner, it’s time to take note of the prevalent threats and understand how you could protect your organization from scammers.
So, in this article, we will show you six of the most effective ways you can protect your business from fraud. Just keep reading!
Common Frauds Small Business Owners Should Know About
Each year, scammers swindle billions of dollars from American businesses. Naturally, small enterprises will feel the impact of financial losses much more than their larger counterparts.
The consequences of fraudulent threats can be far more complex than what appears at the outset. The operational disruptions, for instance, can have severe effects on customer service and sales functions, leading to high opportunity costs of downtime.
Fraud can also signal security vulnerabilities in your organization. This could erode your business reputation. Sometimes, it may even result in legal repercussions.
That is why as a small business owner, you should be aware of some prevalent scams that often target small businesses. Below are some of them.
-
Customer Payment Fraud
This usually involves a fraudulent customer overpaying for a product or service they’ve received. The payment is made via check, and they ask you to wire the extra amount to a personal account.
You’ll only realize it was a scam a few weeks later once the bank notifies you that the check has bounced.
-
Phishing
Your customer databases, vendor information, bank details, and similar data can be of value to malicious actors. They could, for instance, sell them on the dark web or use them for financial scams.
Phishing attacks are aimed at stealing such critical business data. They’ll often rely on impersonation tactics to dupe you and your team into divulging confidential business information.
-
Invoicing Scams
Fraudsters could intercept your vendors’ email accounts and send you fake invoices with altered payment information. Deceptive vendors could also target you for invoicing fraud by, for instance, billing you for items you’ve never received.
-
Fake Business Services
In office supplies swindles, for instance, fraudulent sellers dupe businesses by demanding money for products that were never ordered or taking advance payments for items they have no intention of delivering.
Similarly, fake advertisers, consultants, and a variety of service providers could trick you if you’re not careful.
-
Business Identity Theft
This is when malicious individuals impersonate your business to swindle money from unsuspecting stakeholders. They could, for example, spoof your website or hijack your social media account to run fake promotions and lure customers into financial scams.
-
Internal Fraud
Each year, American businesses lose $50 billion due to employee theft. Deceitful employees can commit various crimes that could put your business at risk. For instance, they can write checks to themselves under the pretext of a vendor payment or pocket cash payments from customers without issuing a receipt.
They may even forge documents using your signature and company details to target your stakeholders for swindles.
How to Protect Your Small Business from Common Scams
#1: Establish SOPs, Policies, and Security Protocols
These are essential for minimizing scam-related risks and providing employees with the necessary guidance to avoid and tackle deceptive schemes. For example,
- Set up strict verification and approval mechanisms for placing purchasing orders, receiving goods, processing vendor payments, handling customer refunds, assessing business opportunities, and performing other critical business activities.
- Create BYOD policies when your team uses their own devices for work purposes.
- Develop protocols to prevent cyber threats and phishing scams. These must cover guidelines for using secured internet connections, installing company-recommended software, sharing files, protecting data, and the like.
- Establish job roles, responsibilities, and KPIs for each employee to instill accountability.
#2: Strengthen Digital Security Hygiene
Your IT security infrastructure and practices play a major role in safeguarding your business against scams. Some of the steps to take in this regard include,
- Protecting business files, accounts, and devices using foolproof passwords.
- Setting up two-factor authentication as an extra safety barrier for preventing data theft.
- Safeguarding the business computer network with a strong firewall.
- Installing anti-virus guards on all devices used for business purposes, including smartphones, to detect and prevent malware threats.
- Scheduling regular data backups to help with the recovery process in case of data-related scams.
#3: Set Up Access Controls
Strengthening the security of your business’s physical assets is necessary to minimize inventory, data, and financial theft and related scams.
Always store critical documents and files in a secured location with strict access controls. The same goes for your product inventory and other high-cost items.
A fingerprint- or card-based digital system is the easiest solution to prevent unauthorized access and monitor entry and exit activities at your business premises. Installing security cameras is another important step for your peace of mind.
#4: Implement Stakeholder Screening
Certain stakeholders, including employees and vendors, have access to some of your high-stake business resources. Following a stringent screening process before engaging with them is, therefore, needed for the safety of your enterprise. For instance,
- Carry out extensive background checks before hiring employees.
- Follow a vendor screening process to vet supplier information before placing orders or signing contracts.
- Review external communications from stakeholders to verify their source before responding or taking action. For instance, use Nuwber to reverse search unknown email addresses before sharing order data or accommodating payment requests.
#5: Generate Awareness
Fighting business scams is not something you can do alone. You need the commitment and support of your stakeholders, too. For this, you must create a conversation around it and facilitate and encourage positive action toward preventing fraud.
- Educate your employees about common deceptive threats and the importance of being skeptical when dealing with third parties.
- Train employees on essential security measures for protecting business data and detecting and preventing fraudulent attempts.
- Raise awareness among customers about phishing and impersonation scams and how they could protect themselves against fraud.
- Work together with vendors to strengthen their security policies and infrastructure to mitigate threats arising from vulnerabilities in their business operations.
#6: Monitor Consistently
Continuous monitoring is a must for identifying security gaps and potential threats on time. For instance, you must regularly review bank and credit card statements to identify unusual activities.
Scheduling periodic audits to check employee and vendor compliance with established processes is equally essential.
Final Note
Taking necessary measures to protect your small enterprise from scammers isn’t just important for your organization’s security. It’s crucial for the safety and peace of mind of your customers and other stakeholders, too.
While taking preventative steps, remember to develop an action plan to mitigate business impact in the event of fraud. This will help you recover swiftly and minimize costs and downtime with prompt and effective action.
