Business Tips

Preventing Fraud in Your Small Business

Fraud can hurt your books in a major way. In the worst cases, scammers get away with their wrongdoing, and businesses may be forced to close. It is vital that you protect your business from fraud both from inside and outside of the company.

Familiarize Yourself (and Your Staff) with Common Scams

It helps to be aware of common scams and tactics, so spend time researching. Some have been around for years and are just as prevalent today, but new trends emerge, as well. Keep yourself in the loop.

Scammers often use tactics like pretending to be someone you know or creating a sense of urgency or intimidation. They also tend to use untraceable payment methods, like wire transfers, reloadable cards, or gift cards. Among the common scams are fake invoices, scams where they pretend to be with a utility company or government agency. They may also try to offer fake tech support or business promotion. These are common examples, but there is no limit to the methods they’ll try. Always make sure you are completely confident that you are paying someone that you should be.

Make sure your staff is also up to speed on common scams and tactics and that they are also cautious about payments and sharing information.

Don’t Rule Out Employees

You likely trust the people you’ve hired, but don’t rule out employees as potential bad actors as many common scams come from within the businesses being victimized. Worse still, this often happens with people who have been with the company for a significant amount of time.

“Employees who steal typically have worked at a business for several years before starting to steal and continue for an average of three years before they get caught,” says Daniel Kehrer, writing for SCORE. “That’s a lot of time to generate losses for the business.”

To prevent employee fraud, Kehrer recommends supervising closely, using purchase orders, informal audits, and computer security measures, controlling cash receipts, tracking checks, managing inventory, and staying aware of accounts receivable. He also suggests implementing a way for employees to report fraud by co-workers and watching for signs of potential theft, such as “sudden, apparent devotion to work and working late,” lifestyles that don’t match salary levels, objections to procedural changes related to finance or inventory, etc.


The Federal Trade Commission (FTC) stresses verifying invoices and payments.

“Check all invoices closely,” it says. “Never pay unless you know the bill is for items that were actually ordered and delivered. Tell your staff to do the same. Make sure procedures are clear for approving invoices or expenditures. To reduce the risk of a costly mistake, limit the number of people who are authorized to place orders and pay invoices. Review your procedures to make sure major spending can’t be triggered by an unexpected call, email, or invoice. Pay attention to how someone asks you to pay. Tell your staff to do the same. If you are asked to pay with a wire transfer, reloadable card, or gift card, you can bet it’s a scam.”

Use Tech Wisely

If you’re not tech-savvy, take time to learn. Understand cybersecurity precautions and implement them. Again, make sure team members are up to speed. Require strong passwords on all devices and for all online services. Ensure that your network is secure and that everyone knows to avoid interacting with phishing emails, text messages, etc. Even phone calls should be approached cautiously. Caller IDs can be spoofed, so check you are interacting with the right person before exchanging any money or important information.

Fraud remains rampant, and scammers never seem to give up. That means you must always keep your guard up for the good of your business. If you can do that and also get your employees to remain cautious, however, scammers will have a less chance in trying to get your money.