While it is the large businesses who make the news when there’s financial fraud, the greatest amount of wire fraud happens to small business owners. Recent research indicates that 78% of small businesses suffer some kind of wire fraud each year. In fact, all businesses lose at least 5% of their earnings to fraud every year. Since it has become more difficult for criminals to break into large corporations due to their internet security, firewalls, and authentication practices, thieves target small businesses frequently because their security is commonly not as strong as that of a large company. The average fraud loss for a small business is roughly $250,000, which can put many small businesses in real financial trouble.
As a small business owner, how can you protect your company against wire fraud? How can you ensure your business is safe from fraud? Here are some suggestions you can use to keep your business safe.
Train Your Employees to Spot Fraud
Often, wire fraud for a small business begins when an employee opens an email with a link that opens the business up for wire fraud. Many small business owners believe all their employees are smart enough not to click on any link in an email. However, that may not always be the case. Surveys of small business employees indicate that over half of them admit to clicking on a link in an email. That type of attempt to gain access to business information is called phishing, and it occurs when criminals send links to hack into your business. Most phishing scams target the financial information for the business. Phishing scams are the most common scams in business fraud.
How should a small business educate their employees about fraud? Train your employees about email fraud and phishing scams. Employee training for fraud is fairly simple. If you don’t want to handle the training yourself, there are plenty of ready-made presentations and videos that can help. You need to provide training for your employees regarding all types of fraud. Some of the most common forms of fraud include:
- Relative scam
- Utility companies
- Debt collection
- Employment offers
- Even online dating fraud
Once your employees can spot fraud, you will go a long way towards keeping your business safe from cybercriminals.
Check Your Vendors Thoroughly
Another prevalent type of wire fraud, and one that is newer than the phishing fraud, is vendor fraud. Vendor fraud occurs when a criminal uses your business accounts to set up a fake vendor account with regular payments. These payments to fake vendors may start as small transactions that are barely noticeable. Over time, the transactions can increase in value, and can steal tens of thousands of dollars from your business before you catch them.
As a small business owner or manager, there are steps you can take to ensure you are only paying vendors you do business with. You can begin this process by putting in place procedures for adding new vendors your business buys from. If your bookkeeping and finance employees follow the correct vetting procedure, your business will be less likely to experience fraud. Your bookkeeper can also check your current accounts payable vendors to ensure they are safe to pay invoices.
Another excellent idea for small business owners is to have your prospective vendors fill out a W9 so you can ensure they are not part of a scam. A W9 form is an official request for a business’ tax identification number. All small businesses, even a sole proprietorship, will have a Social Security Number or a tax id number. If you have a vendor who refuses to provide either a Social Security Number or a tax id number, you don’t want to buy from them.
Be Safe When Wiring Money
Some small businesses wire money regularly to vendors they do a large volume of business with, because it is safer than sending a check in the mail. However, financial institutions are seeing an increasing number of wire fraud attempts by cybercriminals. You can help keep your wires safe by thoroughly checking your wiring information before the wire transfer leaves your account.
You can also minimize this danger by practicing callbacks on your wire transfers, just to double-check the money is going to the right spot. Because cybercriminals will usually only target a business for a short time, and will move on quickly if they aren’t successful, you may be able to eliminate this threat through vigilant checking of your wire transfers.
Another step you can take to prevent fraud is to ask your payees to undergo an out of band authorization for large wire transfers to prevent fraud. An out of band authorization puts two checks in place for businesses to verify the legitimacy of your vendors before you pay them.
Do you use international wire transfers? If so, then you need to be extra careful. Many international transfers are wire fraud attempts to get into your system. You will need to put in extra protection to ensure all of your wire transfers are safe.
Beware of Returns
No business owner wants to process returns because returns take money out of your pocket. However, they are often a part of doing business. You want to be sure your client or customer’s refund requests are legitimate. If you don’t already have a refund or return policy, you need to create one as soon as possible. Have your refund policy spelled out for your business (ideally on your website), and on contracts and invoices (or at least a link to this page). If you sell items to customers, you need to ask for a receipt in order to process returns, and you need to limit the time period you’ll accept returns to 30 days or less. By having a strict return policy, you will be able to limit the chances of fraud in this area.
Upgrade Your Technology
You may have considered putting safety procedures in place to combat fraud, but have you thought about using technology for protection? If you upgrade your wireless technology, you may want to consider getting a virtual private network for your business. Virtual private networks create an island of safety for your business, even over public internet connections. Some business owners may be reluctant to spend money on technology, but investing in a little technology now may save thousands of dollars in fraud costs.
Not sure about upgrading your internet to use a virtual private network due to the costs? There are some other safety features you can buy that aren’t as expensive. For example, you can change your wireless access to private rather than public, so that your customers and employees can only access it with a password. You can also create cloud backups for all your technology, which means it will be available anywhere, whether your computers are down or not. Also, if you have more than one location for your business, you may want to create a firewall to keep your business information as safe as possible.
You can also set up two-factor authentication for your company before payments are processed. Two-factor authentication ensures the person requesting money must have multiple forms of proof they are who they claim to be. Meaning, if hackers have some of your business information, they cannot use it to open accounts and use your good credit without verifying who they are in relation to the business.
Put Everything in Writing
If you don’t have your business practices in writing, there is no time like the present to create safety procedures for your financial transactions. For example, make sure all your vendors understand how money is exchanged between businesses by sending them a copy of your business policies. While they may complain a little, many businesses are used to dealing with client contracts and procedures.
Do you buy a lot of materials and supplies from vendors? Your business needs a vendor contract. If you don’t have a vendor contract, it is time to make one. A vendor contract will spell out payment terms, methods of payment, a return or refund policy, and how to handle disputes over payments or merchandise. You can find examples of good vendor contracts on the internet, or you can hire a lawyer to draw up a vendor contract for your business.
Protea Financial Can Help You Protect Your Business from Wire Fraud
As a business owner, you have enough to worry about. You are constantly looking for ways to keep your employees happy, and reward your hardest-working employees. You want to keep your business fresh by coming up with new ideas and products. On top of that, you also need to effectively market your business to attract new customers. The last thing you want to worry about is ensuring your business is safe from fraud.
However, by taking steps to keep your business safe and secure, you are working to ensure the longevity of your business. You can educate your employees to watch out for fraud in scam or spoof emails. You can warn your employees against other types of financial fraud, such as fake utility payments. Also, you can thoroughly vet your vendors, and ensure that your payments are going to a legitimate suppliers of goods and services for your business. Use technology such as virtual private networks, two-factor authentication, and private passwords to keep your information safe. Finally, have all your vendor contracts in writing, so there’s no chance of fraud. By following these steps, you can work to keep your business safe from fraud.
Need additional information about financial security and hiring great people to keep your business finances running smoothly? We can help. Contact Protea Financial today.
Learn More About Wire Fraud
Wire fraud is a massive problem if you do not know how to spot it before it happens, or stop it if it already happened. Turn to us here at Protea Financial for help spotting wire fraud today!