Attention Connecticut small business owner: What measures are you taking to protect your company from fraud?
According to a 2010 report from the Association of Certified Fraud Examiners, incidents of occupational fraud are 31 percent more likely to occur at small businesses as opposed to larger companies. To add insult to injury, as many as 40 percent of small businesses owners are embezzlement victims and a staggering one-third of all bankruptcies are the direct result of internal theft.
More alarmingly, a recent TD Bank Small Business survey found that although nearly three-quarters of American small business polled are incorporating some steps to protect their business, only one percent of respondents cite falling victim to fraud as a top business concern, even as cases of criminal fraud are on the rise.
The best defense is a good offense. Here are five proactive steps you can take immediately to help prevent fraud:
• Manage finances using secure online banking. Banks and other financial institutions are at the forefront of developing and using security measures that help ensure financial information remains confidential and safe
Online banking is a secure and essential tool for any small business owner. It's important to check your account activity regularly.
• Protect computer systems and practice online awareness. Being complacent about cyber protection can lead to the compromise of critical information and detrimental consequences for your business. Every computer at home and in the office should have installed and regularly updated firewalls and anti-virus software.
While conducting business online, be aware of "phishing" — an electronic scam that attempts to obtain confidential personal or financial information from its target. It takes the form of a fake message, usually an email, which appears to be from a financial institution or service provider. Never reply to any email or pop-up message that requests you to update or provide personal information.
Given the influx of new digital technologies and operational tools available for small business owners, it's increasingly important to learn about the latest trends and techniques used by cyber criminals. If an offer received via email or on a website sounds too good to be true, it probably is.
• Safely handle sensitive documents and financial statements. The web isn't the only place where thieves can steal valuable information. Some of your own employees and outside parties can steal important mail, credit card information or checks and commit fraud.
Printed financial statements, Social Security numbers and other sensitive papers should be disposed properly using a shredder or saved in a securely locked device. To avoid the hassle of handling several papers, banks allow customers to opt out of paper statements and receive online statements instead.
Technological advances have even put photocopiers at risk. Most photocopiers built since 2002 contain a hard drive that stores every image scanned, copied or emailed.
Treat documents in the standard office copier just as they would any printed document, and guard that information accordingly.
• Obtain fidelity insurance. Crime and fraud-related losses generally aren't covered by property insurance policies. As a result, it's important to protect money losses from workplace fraud.
Fidelity insurance protects your business against criminal acts such as robbery, embezzlement, forgery and credit card fraud. Liabilities secured under this type of insurance usually include money loss coverage (burglary or theft) and employee dishonesty (embezzlement and forgery).
According to the Association of Certified Fraud Examiners, 80 percent of workplace crime and abuse is performed by employees. Tough economic times often result in increased incidents of fraud and embezzlement.
• Incorporate appropriate checks and balances. Every small business owner should perform an internal review and assessment of company finances on a monthly basis. Make sure payment amounts match all invoices and check for any missing documents. Running random audits or having a third party audit your books once a year will show your employees you are serious about fraud and deter them from committing deceptive acts.
If you think you're a victim of business fraud, immediately contact the fraud department of any of the three major credit bureaus to place a fraud alert on your credit file.
Following these five preventive tips will help protect your finances and allow you to focus on the success of your business.
Michael LaBella is Connecticut market president at TD Bank.