Ways to Prevent Fraud as an Entrepreneur

The new-age entrepreneurs have many responsibilities on their shoulders. From innovating new products, managing operations to recruiting employees – business owners have to manage everything single-handedly. Unfortunately, in all this hustle-bustle, they often forget about fraudulent scams. At times, employees directly steal cash or claim bogus expenses that significantly decline business profits. Similarly, financial statement fraud and asset misuse are becoming increasingly popular.

Well, that’s not all. In today’s digital landscape, every business is susceptible to fraud. Cybercriminals break into an organization’s system and steal confidential information. They even ask for ransomware while threatening to leak data online. In addition to costing millions of dollars, data breaches can land businesses in legal trouble. Therefore, entrepreneurs must start implementing security measures to prevent fraudulent scams.

If you are not aware of security protocols, have a look below. Here are six ways to prevent fraud as an entrepreneur.

1.     Audit the Books Regularly

Almost every company has a team of internal auditors who oversee business operations. It might seem like your business is running in order, but are those auditors accountable to anyone? Perhaps, not. As a business owner, you have to routinely audit areas that deal with cash, refunds, inventory, and expenses. Look for unknown payment receipts and overchecks to ensure documents aren’t manipulated.

However, if you don’t have the knack for numbers, think no further and learn the ropes. With growing eLearning opportunities, you can pursue higher education online. Hence, consider opting for an online MBA no GMAT required with an accounting or finance specialization.

Alongside equipping you with business acumen, number-crunching skills can help with auditing procedures.

 

1.     Conduct Employees’ Background Check

Believe it or not, every business, whether big or small, is vulnerable to employee fraud. Therefore, you should put anti-fraud controls and policies to prevent fraud right from the hiring process. Firstly, conduct background checks of every employee before hiring. You have to go back at least seven years and determine if the employee has a criminal history. Likewise, look into the credit report of all employees to assess fiscal irresponsibility.

Apart from this, you can do a social media audit by reviewing employees’ social profiles. It will give you an idea about their interests, likes, dislikes, and perhaps, anything that could damage your business reputation.

 

2.     Safeguard Computer Systems

Undeniably, cybercriminals are experts when it comes to computer hacking. They can break into your system, monitor activities, and keep stealing data. Instead of waiting for a data breach, every organization must install a sturdy firewall in their computer systems. In addition, set up strict protocols that require employees to create passwords. These practices will ensure no one without a password can access the computer systems. Also, have employees change the password every 60-90 days.

Furthermore, you should backup all the files on a weekly or daily basis. But remember to store them offsite because your files would be safe if something happens to the system. Thus, you will be able to restore them without any downtime.

 

3.     Educate Your Staff

Most cybercriminals get access to a company’s systems through employees. They disguise themselves with another worker’s name and ask for confidential information. Since employees aren’t aware of phishing scams, they end up sending that information. Similarly, workers also click on spammy links that corrupt the entire system. To avoid these cyber threats, you have to ensure your staff is well informed about online fraud scams. You can educate employees about fraud-prone areas and tell them about the warning signs of fraud. Likewise, teach them how to detect and report suspicious behavior to the management.

 

4.     Segregate Accounting Duties

Usually, small businesses have one person that always manages the money-related tasks. If your accountant is also responsible for client receivables, processing payments, and preparing financials, distribute the tasks. Unfortunately, such practices make it easy for cases of fraud to go unnoticed. For example, the accountant might be understating expenses to show high profits. Likewise, he/she might include bogus costs.

To mitigate the chances of such frauds, enterprises must segregate accounting duties. You have to hire at least a team of 4-6 people to handle the accounts department. One person can manage cash, the other can look after sales, and the rest can work on financial statements. Having separate functions will improve accountability and prevent fraud.

 

5.     Protect Credit Card Information

Credit card frauds have been in the limelight for the past few years. The data leakages on sites leak credit information which leads to substantial financial losses. If you have been accepting payments through credit cards, install high-tech security measures to safeguard that information. For example, you can implement additional firewalls to close doors for unauthorized access into the system. Similarly, you can use an end-to-end encrypted server to protect information.

Moreover, the business should see who they provide credit card details, including the vendors and suppliers. You have to ensure they use a secure online bill payment service to close doors for theft and fraud. Also, activate your mobile banking service to receive messages whenever someone swipes the business credit card.

 

Final Thoughts

Business frauds are becoming a growing concern for today’s entrepreneurs. Sometimes, frauds happen because of dishonest employees, but often, cybercriminals steal confidential data. In addition to conducting background checks, you have to be aware of online scams. Perhaps, you can start educating your staff about fraud and look out for prevention measures to strengthen overall security. Having fraud management systems in place will give you peace of mind, knowing your data is safe from scammers.