Fraud schemes are prevalent in the marketplace today, from business email takeovers to hacked data bases and sophisticated levels of phishing. Small businesses tend to fall prey to check tampering, skimming, payroll misappropriation and cash larceny schemes at twice the rate of larger companies. In addition, small businesses have a much lower implementation rate of anti-fraud controls than larger companies, leaving smaller organizations more vulnerable to fraud schemes overall.1 Small businesses are also susceptible to internal fraud where a small group of employees can work in collusion to exploit vulnerabilities.
What can your business do to protect itself from fraud? Move your payments processes toward electronic methods as an inexpensive and easy option for you to electronically control your business's cash outflows and add the controls necessary to help protect your business from fraud. By design, electronic payments systems offer built-in redundancies and basic controls (automatic reconciliation, blocks and filters, etc.), creating audit trails, and allowing businesses to set up procedures and controls, e.g., division of duties and approvals for transactions.
Advancing technologies can help you thwart fraud attempts. Solutions range from simple process changes to improving electronic processing and reconciliation capabilities. The following tools are readily available and can help you control spending and prevent fraud with minimal time and effort:
Make payments online. Moving away from paper checks and adopting a more electronic payment environment reduces the opportunities for fraud — both internal and external. According to the Association for Financial Professionals, checks remain the number one source for fraud at 43 percent of fraud committed.2 To reduce paper-based fraud, many companies are choosing to utilize electronic payments. Over half of business executives surveyed by SunTrust who use electronic payments feel extremely secure from online fraud, and 46 percent say electronic payments reduce opportunities for fraud.3 Online payments give you more acute control over all your payables, including suppliers, employees, transfers and tax payments as well as added visibility into disbursement trends. Online banking with Online Cash Manager allows your small business to view and control your payables electronically while creating an electronic audit trail.
Monitor activity through reports and alerts. Online Cash Manager provides you with payment reports accessible through your computer. You also have the option to set up alerts through Online Courier to monitor deposits posted, ACH and wire transactions, checks paid over a certain amount, etc. These alerts can also be accessed through your computer but may also be "pushed" to your tablet or phone for more immediate access. If activity occurs that needs your attention, you have the information you need to quickly decide on a plan of action.
Utilize an online accounting system. Direct Connect for QuickBooks® offers an easy way to connect your financial accounting and your banking for easier account reconcilement. It allows you to view all your prior day transaction activity through QuickBooks® and posts matched transactions automatically, isolating any "outliers". Using Online Cash Manager, transaction data can be exported to other systems using common file formats like .csv.
Replace cash and checks with card payments. By using business credit cards or purchasing cards, you can better track, limit and control cash expenditures. Issuing credits cards for employee expenses, for instance, eliminates the time-consuming tracking and reconciling of cash expense reports, while providing detailed online accounting of expenses. Purchasing cards, on the other hand, give your business better control over payment timing and can reduce exception processing. By implementing electronic payments and automatic reconciling of business purchases, your company could make it harder for vendors - and employees - to submit and get approval of fake invoices. As an added benefit, credit cards can also extend payment terms and provide you with additional cash flow when you need it.
Implement card spending controls. Card payment systems offer you the ability to assign authorities at a user level with strong audit tracking adds controls that, along with the elimination of paper, help check internal fraud. Most card management programs automate guidelines that you set online for your credit cards. These systems can help you reduce internal costs and improve controls.
The threat of fraud in today's financial world is real. Stopping fraud and avoiding the disruption of your business that fraud brings means understanding steps you can and should take to protect your business.