You can be the most honest person with the most trustworthy business, yet still be in financial trouble due to fraud. This is because scammers often target small- and medium-sized businesses (SMB) more frequently than large corporations because SMBs often don’t have the same level of security measures in place.
The Australian Competition and Consumer Commission (ACCC) reports that during the COVID-19 outbreak, they have had over 4850 scam reports mentioning the coronavirus with over $5,820,000 in reported losses. Scammers are hoping that you have let your guard down and the ACCC’s Scamwatch urges everyone to be cautious and remain alert to coronavirus-related scams. The Association of Certified Fraud Examiners (ACFE) reported that most businesses lose around 5% of annual revenue due to fraud that is committed by managers, employees, executives and owners!
Regardless of coronavirus or the size of your company, financial fraud could be the final straw that breaks your business.
Be alert: 5 types of fraud to watch out for
1. Digital fraud
Someone doesn’t need to be in your office or workplace to commit fraud. Scammers can hack into different computer and software systems to steal valuable information, such as customer details, credit card numbers, bank account information and more.
Related: COVID-19: How business can manage Cyber and Data Security Risks
2. Fake invoices
The creation of fake invoices can be one way to move money out of the company. Another common practice is to use ‘ghost’ employees on the payroll so someone can collect their pay checks.
3. Fake bills
There is quite a bit of fake cash circulating in the business space, and it’s possible that these bills could come through the doors of your business. If you want to prevent fraud, have systems in place to check these bills at the register.
4. Identity theft
If someone gets their hands on bank statements, tax file numbers or financial reports, they might be able to steal enough money to commit identity theft.
Collecting a little off the top can go unnoticed for a long time, especially if you don’t have a good accounting system in place. For example, a person might take a portion of the funds before the transaction is listed in the accounting records. Using business credit cards for personal transactions and stealing office equipment and claiming Workers Compensation for fake illnesses are, sadly, all too common.
Don’t despair: 5 ways to prevent fraud
Setting up systems can be a critical step to prevent fraud. To avoid it, here are 5 actions you can take to protect your business from scammers.
1. Digital security
Digital scamming can be difficult to detect but following these tips will largely prevent it happening to you. Use reputable anti-virus protection and back up your data securely, preferably offsite. Reset passwords regularly and use two-factor authentication where possible. Make sure all devices are up-to-date and educate all staff regarding new information. Never open attachments from unknown sources; even if the source is known, contact the sender to confirm. Minimise work on personal devices and never work on unsecured public WiFi networks. Consider outsourcing your IT to a reputable IT partner.
2. Accounting systems in place
Having only one person managing your accounting and bookkeeping is not wise, not matter how trustworthy they are. Consider hiring a trusted outsourced Accounting team to implement checks-and-balances, as well as regular accounting audits. A solid accounting system provides a good foundation to help you prevent fraud and avoid issues in the future.
3. Internal audits and controls
Despite freedom of information, there is a case for staff members only knowing what they need to know. It’s certainly appropriate to restrict access for employees who don’t need information about inventory or financial details. Have a solid plan in place for regular accounting audits to review bank account statements and activity.
4. Lock digital files
Put yourselves in the mind of the thief and see how easy or hard it would be to gain access to unauthorised data. Not only do you need to password protect digital files, but it is also important to be sure that paper records, if needed, are kept under lock and key.
5. Train your employees to be aware of frauds
Not only do you need fraud prevention training when onboarding new employees, but it is also important to offer ongoing fraud training. Organise regular training sessions for staff members on how to recognise digital scamming and other fraudulent activities. Your employees should be taught how to identify the warning signs of fraud and who to go to if they discover it.
Scammers are clever but not fool proof. If you are aware of how they work and implement thorough preventative measures, your business will have a great degree of success protecting itself against financial fraud.
Related: ATO SCAM ALERT: Don't get caught paying fake debts
Have you noticed our #FridayExpertTips... here's one that relates to #CoVID-19: Contingency Planning
"Things are not going to be the same on the other side of COVID-19. Businesses that address the issues head on through contingency planning, will be far more likely to create resilience and be able to revive quickly."