4 Ways To Prevent Payment Fraud In Business

No matter how small or large your business is, it can still be susceptible to fraud. Fraud isn’t only committed by an outsider, but the act can be done by the employees, managers, or even by the owners. 

Avoiding Fraudulent Activities

Your business must have fraud prevention programs to better build confidence with your business partners, clients, and even with your employees. Here are some of the ways on how to prevent fraud in your business:

1. Be Careful With Your Sensitive Financial Information

One of the targets of fraudsters is your financial information such as your Social Security Number or bank accounts. A common way for them to get financial information is by reaching out to you by phone or email pretending to be a government agency, financial institution, or business partner. In most cases, they’ll make a scenario claiming your account has been compromised or needs updating, so you need to give out information to retrieve it. 

Sometimes, they’ll let you click a link or open an attachment to access your business information. A bank or a credit card company wouldn’t usually ask you to update important information outside their platform, so if you receive an email like this, it’s most likely a form of scam known as phishing, so just ignore or better yet delete it. 

One of the common fraud impacting businesses and all people with a bank account is the Automated Clearing House (ACH) fraud—any unauthorized electronic transactions. Good thing, there are different fraud detection technologies used to effectively reduce ACH fraud activities.

2. Perform Security Audit

One of the challenges owners face is knowing how to safeguard their business when it comes to fraud. The best thing to do to ensure you won’t go bankrupt is to conduct a security audit where you’ll let cybersecurity agencies or experts determine possible gateway of financial crimes. A part of a security audit helps your business find ways on how to do preventive measures against fraud attempts.

A simple preventive measure to ensure all your business accounts are secured is to formulate a password hard to guess. As a rule of thumb, passwords must be alphanumeric with a combination of symbols or special keys. 

It’s also ideal to use different passwords for each financial account or website you have. As the first line of defense, it’d also help to install spyware protection or antivirus, so hackers won’t be able to get important information saved in your computers.

If you directly receive money from your clients in your bank account as payment for the goods and services your business offers, it’s advisable to use bank verification or funding source verification wherein all transactions coming into your account are only from legitimate bank accounts. Through the risk verification database used, it’s easier to detect fraudulent accounts.

3. Be Aware Of Fraudulent Signs

Fraudulent activities are becoming rampant these days, so it’s ideal for business owners to invest in training employees to have sufficient knowledge on how to recognize fraudulent acts. There are different kinds of fraud common in business—identity theft, payroll fraud, fake money, and even wrongful returns employees must be aware of. 

Fraudsters also change their tactics, so they won’t be easily detected. For example, in the past, fraudulent acts involve large transactions, but today, they make multiple attempts in smaller payments for it to be unnoticeable. If you’re not aware of their schemes, you’ll be fooled easily. It’s important to deal with wrongful transactions as soon as possible because it may lead to a complex issue like bankruptcy.  

Aside from educating each employee about how to determine a fraudulent act, you may also consider utilizing machine learning software to help recognize unusual transactions and notifies you about them. Resolving fraud is a team effort, and everyone should be encouraged to take part in putting an end to it.

4. Know Your Business Partners

In partnering up with other businesses, it’s not enough to just base your trust on first impressions. Some fraudsters are trained to present themselves in a professional way for them to deceive people easily. Experts suggest to trust, but always verify. Before dealing with new clients or entering into a partnership, make sure to do your research. 

It’s ideal to know their physical address, contact number, and references. You may also conduct a background check to have additional information, especially if they have a red mark. Any document submitted must be examined to ensure all information provided is genuine.

Final Thoughts

Fraud prevention is one of the most important things a business should learn because no one is free from it. To stop this illegal activity, there should be preventive ways to be done like being careful with your financial information, performing security audits regularly, being aware of fraudulent signs, and getting to know business partners and clients properly.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.