How To Help Protect Your Small Business From Fraud

What are the biggest expenditures for small businesses? It depends on what these businesses do, but from a macro perspective, what do you think small business owners spend the most money on? Utilities must be high up there — you have to keep the lights on and the power flowing.

Insurance is always a necessary, though sometimes painful, expenditure. For businesses with a dozen or more employees, wages are also likely a big expense. Is there anything else that ranks as high as these, though?

How Businesses Lose Money

What about something that 88% of small businesses lost $25,000 on per year? And what if 65% of small businesses lost over $50,000 on this same thing?

This “expenditure” would be check fraud. Over half of all small businesses lose more than $50,000 on this one specific type of fraud each year! In 2023, IBM found businesses with fewer than 500 employees experienced losses of $3.31 million because of data breaches. Millions of dollars on just data breaches!

Small businesses aren’t alone here. The Association of Certified Fraud Examiners calculated total losses to fraud in 2024 to be $3.1 billion across all organizations. Because larger organizations have more revenue, they tend to lose more to individual incidents of fraud.

However, bigger companies can also pay for more security, both in terms of personnel and systems. Furthermore, threat actors know this. From sophisticated hackers to local conmen, criminals know smaller businesses are often more vulnerable to attacks. What can you do to help prevent your small business from being an “easy mark?”

Helping To Protect Against Fraud

Here are five things small business owners can do to help prevent fraud incidents:

Establish Strong Internal Controls

Creating and implementing clear procedures for financial transactions is a good start. Ensure all your staff understand these protocols and, if possible, separate responsibilities so no single employee has control over an entire process. For example, one team member can handle invoicing while another approves payments. Regular audits of financial records help identify discrepancies early and can deter potential fraudulent activities.

Educate Staff

Conducting regular training sessions to inform employees about common fraud schemes is a simple yet effective method to prevent fraud. Teach employees to identify phishing scams, social engineering and other common fraud tricks. It can also help to encourage a culture where employees feel comfortable reporting suspicious activities.

Enhance Cybersecurity

A lot of fraud occurs online. It’s imperative to protect your business’s digital assets by implementing strong, unique passwords and multi-factor authentication for all accounts. Additionally, update software regularly, use robust antivirus and firewall protection and back up critical data.

Monitor Financial Accounts and Transactions

Regularly review bank statements and financial activity for any unusual or unauthorized transactions. The sooner you detect fraudulent activity, the better your chances of mitigating losses. Many banks offer alert features to notify you of suspicious activity.

Partner With the Right Financial Institution

In the fight against fraud, it’s crucial to have the right partner. Vectra has your back. Contact a Vectra Bank professional today and find out how we help small businesses detect fraud.