Small Business Fraud: 8 Ways to Protect Yourself

Fraud is big business for those who prey on small companies and accounting firms. Because many  businesses have no prevention tools available, they are disproportionately victimized.  Data from the 2010 Report to the Nations from the Association of Certified Fraud Examiners is mind boggling:

• Survey participants estimated that the typical organization loses 5% of its annual revenue to fraud. Applied to the estimated 2009 Gross World Product, this figure translates to a potential global fraud loss of more than $2.9 trillion.

• Small organizations are disproportionately victimized by occupational fraud. These organizations are typically lacking in anti-fraud controls compared to their larger counterparts, which makes them particularly vulnerable to fraud.

• Frauds lasted a median of 18 months before being detected.

Here are 8 ways you can beat the odds. If you’re a Bill.com customer, either a small business or accounting firm that serves small businesses, you’re already at an advantage on all counts!

1. Establish prevention procedures: Be aware. Identify key areas where your business or firm is most vulnerable and know who is accountable for each. Determine the types of fraud that may occur and how they would likely be concealed. Then establish internal controls to keep these possibilities from becoming realities.

2. Go paperless. Every bill or check lying around the office is a security risk. Going paperless with your bill receipt and invoicing will prevent “lost” bills and invoices and reduce the risk of manipulation and information theft. You’ll also get an audit trail so you know exactly who accessed, viewed, or changed a bill.

3. Enforce separation of duties: Clearly define user access to the data, ensuring single users do not authorize, process, and record financial transactions within the business. For example, an employee who enters bills into the accounting package or updates vendor remittance information (their address) should not have the ability to authorize payments for those bills.

4. Automate work processes: Enabling different members of your staff to access bill and invoice workflow is critical to your business or firm’s productivity. But automation is critical. By automating reminders and an audit trail, you ensure that nothing falls through the cracks and that people who are not supposed to be part of the process are kept out. 

5. Enforce payment controls: By segmenting role-based controls, you make sure that no one person has access to information and the ability to edit accounting data (vendor addresses, etc.). Separation of the approval process from payment and of data entry from payment processing is key.

6. Eliminate checks (incoming and outgoing): A single check contains every piece of information needed to access your money. By doing away with paper checks entirely, you protect your business or firm account numbers, eliminate risk of lost, stolen or manipulated checks. By receiving payments electronically you prevent trips to the bank and protect against checks being improperly deposited. Problem is, it isn’t very easy to get rid of checks if all you have are services from your bank. Bill.com makes it easy for you to pay anyone, and get paid, electronically.

7. If you have to pay by check, don’t do it yourself.  There are still times where you will need to send checks to vendors.  If you have to do it, use a service that protects your business. For example, Bill.com sends checks on your behalf, hides your bank account information, and provides positive-pay check manipulation protection (something a business could not easily do for themselves).  Bill.com also assists with audits by automatically uploading cleared check images (both sides!) and storing them indefinitely.

8. Perform more regular internal audits: Automated systems make regular audits much easier, creating an online audit trail with full remittance data, cleared check images and approval confirmations.