You have most likely heard IRS warnings against tax fraud, or been cautioned numerous times about the dangers of identity theft. But what about your business? Not only must we be aware of fraud attempts against personal property and assets, but we must also take measures to protect our small businesses against payment fraud.
Payment fraud has been on the rise lately. The Association for Financial Professionals conducted a survey of 625 payment professionals on Payment Fraud and Control in the year 2013. Their findings were significant: 61% of these businesses/organizations were victims of attempted or successful payment fraud in 2013. The typical financial loss from payment fraud was $20,300.
Of the 61% who were targeted, 87% reported check fraud, 27% cited electronic check (ACH) debit fraud, and 8% experienced ACH credit fraud. It is important to note that small businesses do not have the same legislative protection that consumers enjoy. Instead, businesses must rely on banking or payment processing services to spot and stop unauthorized activity on their accounts, services which usually cost additional fees. Businesses should not rely solely on banking services to protect them, because their bank information still changes hands from internal employees to external companies as payments are processed. Banking services are valuable, but should also be combined with other security measures.
To prevent payment fraud, set up processes to verify information (check readers to immediately verify funds availability/account validity, asking for ID when processing debit/credit cards, and training employees on what to look for to catch fraud before it happens). And to protect yourself from your information being used fraudulently, lock up check stock when not being used, don’t allow the employee who pays bills to also reconcile the accounts, and use online bill pay options if possible to reduce access to your information.