A typical small business loses about 5 percent of its annual revenue to fraud each year — a median of $150,000. What’s more, the Association of Certified Fraud Examiners’ 2016 Global Fraud Study shows that about 23 percent of cases cause losses of $1 million or more. Clearly, when it comes to securing your small business, every bit counts.
Employee misconduct is a significant part of this problem, but there are other important factors that can threaten your business, as well. Here are seven ways you protect your business from fraud:
1. Provide Employees Separate Logins
When employees share a point-of-sale system (POS), it can be difficult to pinpoint the source of fraud when an issue arises. To avoid this, assign all employees their own separate login credentials and don’t allow them to share these logins with each other. This way, every transaction will be linked to a specific individual, limiting confusion.
As an added precaution, set up the POS to automatically sign off when not in use for a prolonged period of time. Doing this will force your employees to verify themselves regularly and make your POS less vulnerable to unauthorised use.
2. Use an EMV-Compliant POS
Up until recently, most major credit cards have used a magnetic stripe system, which allows customers to swipe their card when making a purchase. According to CreditCards.com, however, this type of “swipe card” makes it easier for thieves to steal personal information and compromise your payment’s security system.
To help mitigate credit card fraud, many countries have adopted a new chip-based authentication technology called EMV, which stands for Europay, Mastercard and Visa — the developers of this global standard. While EMV offers more security to the customer, the introduction of the system also represents a shift in fraud liability. Instead of banks being responsible for fraudulent credit card transactions, merchants who choose not to enable EMV are now liable.
3. Perform Regular Inventory Checks
Be watchful for red flags like disappearing merchandise, voided transactions or misplaced items. Keep an accurate tally of what’s in your inventory by performing regular and unscheduled inventory audits. By establishing these regular inventory checks, you can better control irregularities and pinpoint efficiency issues.
Accurately managing your inventory will reduce waste, help your business increase its bottom line and ultimately prevent fraudulent activity.
4. Balance the Cash Register Nightly
Enforce a policy that the cash register must be counted and recorded on a nightly basis. The best way to do this is to put a process in place that requires multiple employees to balance the register and check each other’s work. This will reduce human error, as well as establish a system of accountability.
5. Educate Your Employees
As the business owner, it’s your responsibility to not only keep yourself up-to-date about computer security, but also educate your employees. They are often more involved in the day-to-day activity of the business and will be able to quickly spot and report any suspicious activity.
For example, give your employees a crash course on how to spot a fake credit or debit card. By teaching employees what to look for, they can be your eyes and ears on the ground.
Likewise, educate all your employees about codes of conduct and other compliance policies so everyone is aware of the plan of action and consequences of a fraudulent incident being uncovered. Enact fraud training programs and regular meetings with updates about the goings-on of the company. Employees will be less likely to commit fraud if they understand the consequences of their actions.
6. Safeguard Company Assets With a System of Checks and Balances
Set up internal controls within your small business to ensure everyone is abiding by the fraud rules and regulations. Put measures in place to safeguard your company’s assets by dividing up the work among different employees. Don’t allow a single individual to be responsible for processing payments, making deposits, reconciling the POS drawer and handling petty cash.
Additionally, limit all access to physical and financial assets, important documents, and accounting systems to authorised employees.
7. Double Check Everyone’s Work
Set up a process that audits every employee’s actions, even yours. This is a smart way to mitigate fraud, but it will also put a system in place to limit mistakes, losses and miscalculations, all of which have an effect on your company’s bottom line.
Make sure everyone understands that records of all the money that flows in and out of your business will be double-checked — not because you don’t trust them, but because you want to decrease errors.
By implementing these tips you’ll be able to minimise fraud within your business and set your company up for ongoing success.