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4 Methods of Fraud Your Business Should Watch Out For

No business is immune from fraud. For small and medium sized business (SMB) owners, a shocking 83 percent do not take steps to prevent against modern fraud threats. Ignoring fraud can have great risk. Information from the Association of Certified Fraud Examiners (ACFE) shows that companies with less than 100 employees will lose on average $155,000 every year as a result of fraud.

4 Fraud Schemes That Can Destroy Your Business

Across history, con artists have devised unique techniques for stealing money. Though it is commonly thought that fraud focuses on individuals, businesses are at substantial risk. One scammer named Dina Wein Reis successfully convinced dozens of executives at major corporations to sell her discounted merchandise intended as charity for senior citizens and children. After selling the goods to wholesalers, she collected the profit and took $20 million before being caught.

While a few con artists are deviously clever, the vast majority follow the innovations of others. As a result, business owners can prevent against a variety of scams that are often used. Stopping fraud from affecting a business does require knowing which popular scams to look out for and how they work.

1. Employee Theft

Unfortunately, the most common form of theft and fraud impacting businesses comes from the inside. According to the Global Retail Theft Barometer, U.S. companies lose approximately $50 billion every year due to employee theft. Perhaps even more surprising is that only one percent of employees are prosecuted for their theft. The median amount stolen by a single employee is a whopping $175,000. Companies have substantial financial reason to curb employee theft as it could impact the long term health of a business.

Employee theft can take a variety of forms. According to attorney, Billy Skinner, who defends individuals accused of white collar crimes, falsified reimbursement receipts are one of the most common areas of theft through embellishment of expenses. It is not difficult to get a receipt for a larger meal from a restaurant when the meal cost significantly less. Some employers accept the losses associated with such theft but it can add up. A more financially serious form of employee theft is false vendor billing. In this scenario, an employee creates fake invoices and bills the business for unreceived products and services.

For more comprehensive solutions for preventing employee fraud, visit the U.S. Small Business Administration website:

2. Cyber Crime Is A Reality

Regardless of the size of a business, various cybercrimes are a very real threat. The National National Small Business Association has noted that almost 50 percent of cyber attacks are aimed at SMBs. But many small businesses fail to take preventative action against potential cyber threats. Weak passwords and other poor information security practices can give hackers substantial access to a business network.

Beyond information being stolen, it can also be “ransomed”. Hackers can potentially lock a business network with high level encryption or delete information from that system, forcing owners to either pay a fee or risk losing the information entirely. There is no shortage of ways for businesses to lose money as a result of cyber crime. The best defense against such attacks is following common advice from IT professionals and training employees on standard practices.

3. Stolen Credit Cards

Stolen card cards are a substantial threat to a business. If a scammer orders a large volume of goods from a company, and the products are delivered, the business has to absorb the loss. A sizeable number of stolen card cards can also risk the relationship between a merchant and their card card payment processor. Businesses that have lost a low risk credit card processing relationship as a result of fraud, will be labeled high risk when processing credit cards in the future, which can result in significantly higher fees.

4. Refund Theft

Simplifying return and refund policies has been a popular approach for retailers as competition increases. Various websites and physical retailers make it fairly simple to return products, even without a receipt in some instances. Making this process easier has resulted in a wave of refund theft from physical and online retailers alike.

There are a number of signs that can prevent retail theft. Frequent returns by the same customer is perhaps the most common. Retail con artists generally try to take advantage of the same businesses for as long as possible. Other, more complicated scams might follow these frequent returns. For example, expensive items like electronics or jewelry, have serial numbers that can potentially be changed. A lower cost item being returned for a more expensive one is also a fairly common version of refund fraud. Large chain retail operations have entire asset protection departments to screen for refund fraud. Small and medium sized businesses will have to identify and carefully watch their customers to prevent such activity. is now offline.

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