First it happened to Apple and Sony. Then came NASA and the U.S. Senate. Almost daily, we hear about another organization that has had its computers hacked, exposing everything from company trade secrets to personal information.
But it's not just high-profile businesses and organizations that struggle to keep important information to themselves. Small businesses are often even more vulnerable. The reasons? While most small business owners understand the importance of protecting their financial information, many cannot afford the necessary security controls to thwart these attacks.
The reality is, virtually anyone who can gain access to your business' information—including employees, customers, vendors and cyber thieves—can perpetrate fraud. Some small businesses rely on their banks and other partners to do the "heavy lifting" when it comes to fraud protection. In addition to all the security measures taken by financial institutions, there are also steps small businesses can take to reduce their risks.
Among the most fundamental is to maintain separation of duties. In other words, no individual should control more than one phase of a financial transaction or operation. That means that the person who writes checks or makes deposits shouldn’t also be the one reconciling the bank account. Likewise, a wire transfer should be a two-step, two-person process; the person who initiates a wire transfer shouldn’t also submit it to the bank. Dual controls like these not only help reduce the likelihood of internal fraud, but they can help protect against cyber attacks as well. And by keeping duties separate, deliberate fraud would require the collusion of two or more individuals.
The Latest Fraud Protection Tools
Online banking has made it easier for small businesses to monitor and reconcile banking accounts every day. But owners also have to know what to look for. For example, even though check numbers and amounts may match your check register when viewed online, the payee’s name on the actual check may have been altered. Having the ability to view both sides of the check online and see the actual payee and endorsement is essential.
Many banks now offer low-cost tools that can help reduce the risk of fraud, including:
- Positive Pay helps prevent paper check altering and forgery. You provide your bank with an electronic file each day of all the checks you issue. The bank then matches the paid checks against the file to ensure the amounts, and in some cases, the payee’s names, have not been altered.
- A lockbox allows a company to have incoming payments collected at a secure post office box and transported directly to a bank for processing, eliminating the need for employees to handle incoming checks.
- Remote deposit enables a business to deposit checks into a bank account from the office by scanning a digital image of the check and transmitting it to the bank. With no need to physically deliver checks to the bank, companies reduce the risk of checks being lost or altered en route.
- Automated Clearing House blocks and debit filters allow you to identify the persons authorized to make payments or take money from your account electronically. Unauthorized transactions are automatically rejected.
A strong fraud protection program can't eliminate all worry. But it can allow you to focus your primary energy where it needs to be: on providing valuable products and services to your customers. iBi
