Whatever type of business you own, there’s always a risk that you could fall victim to financial fraud.
As digital transformation accelerates, scammers have access to an increasing range of techniques for taking money or other financial assets from your business.
Indeed, research published by SecurityBrief has revealed that one-third of UK businesses were hit by invoice fraud in the past year.
If you’re unlucky enough to lose money to a scam, this could damage your bottom line, limit your ability to continue operating, and diminish consumer trust in your brand. What’s more, it’s likely to take an emotional toll on you as a business owner.
Fortunately, there are steps you can take to protect your business from falling victim to financial fraud. Read on to find out more.
Educate your employees about these 4 common types of business fraud
One practical way to reduce the risk to your company is to educate yourself and your employees about financial fraud. This could help ensure that you spot any security breaches and act on them quickly.
There are many different types of business fraud that you and your team should be aware of, including:
- Invoice fraud – Criminals impersonate your suppliers and send fake invoices or intercept and change genuine transactions.
- Corporate identity fraud – A fraudster steals your company’s identity and uses it to buy goods and services.
- Payment fraud – Scammers intentionally use false or stolen payment information to make a purchase.
- Insider fraud – Your employee or employees act against you to engage in activities that could damage your business, such as stealing important information or assets, or colluding with a third party to defraud your company.
Invoicing in particular has become a common target for scammers.
Invoice fraud typically involves using low-value invoices that look genuine to direct payments into bogus accounts. These fake invoices can be extremely convincing. This, coupled with the small amounts being claimed, often means that the invoices slip through the net and allow the fraudsters to bank the money.
What’s more, the above is not an exhaustive list, and scammers are developing new strategies all the time. So, vigilance is key.
You and your team don’t need to become experts in financial fraud. However, raising awareness increases the chance that a potential scam will be caught before it can do significant damage.
Put a robust fraud policy in place
A fraud policy sets out your company’s attitude to fraud and clearly outlines individual responsibilities for preventing, detecting, and reporting fraud.
Establishing a robust anti-fraud policy can act as an important deterrent to potential scammers both outside and within your business.
Your policy will be unique to your business but some factors you might want to include are:
- A statement of the organisation’s commitment to managing the risk of fraud
- Systems, procedures and controls for preventing and detecting fraud
- Individual responsibilities and accountabilities
- The process for investigating instances of suspected fraud.
Establishing clear guidelines and expectations in this way can help your business as a whole respond quickly to fraudulent activity.
However, it’s important not to be complacent. Regularly reviewing and updating your policy could ensure that you keep pace with the rapid changes in security threats and technology that scammers use.
You might want to consider appointing a dedicated fraud officer to take responsibility for overseeing best practice, monitoring systems, and keeping your fraud policy up to date.
Protect your business technology with cybersecurity
As businesses across sectors are becoming increasingly reliant on digital technology, it’s no surprise that cyberattacks are a major concern for many companies.
The 2024 cyber security breaches survey published by the government has revealed that half of businesses experienced some form of cybersecurity breach or attack between April 2023 and April 2024.
The most common type of attack on businesses was phishing (84%), followed by impersonating organisations (35%), and viruses or malware (17%).
Businesses of all types and sizes can be vulnerable to such attacks. Santander, which employs 200,000 people globally, recently confirmed a data leak. According to BBC News, 30 million customer accounts were hacked giving fraudsters access to confidential information they later tried to sell.
So, implementing a cybersecurity system for your business is crucial.
Keep a close eye on your finances by working with a professional
If you have a solid grasp of your company’s finances, you’re more likely to spot when things go awry.
As a business owner, you’re probably constantly spinning lots of plates. So, building a team of experts around you is essential for keeping things running smoothly.
Indeed, working with a financial planner to keep a close eye on the finances of your business could reduce the risk of a red flag – such as an unauthorised charge on your account – being missed.
Get in touch
As a business owner, it might be easy to miss the signs of financial fraud while you’re focusing on the day-to-day operation of your business.
We can help you develop and regularly review a robust financial plan for achieving your wealth goals.
To find out more, please get in touch. Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
