24 ways to protect your business from financial fraud in 2024

Published on Jan 26, 2024

24 ways to protect your business from financial fraud in 2024

Financial fraud poses a significant risk to businesses of all sizes and industries. In fact, 46% of businesses report they’ve experienced some form of fraud in the past two years, according to a study from PwC. The consequences are severe, with fraud leading to financial losses, reputational damage, decreased customer trust, and more.

As you prepare to grow your business in 2024, consider prioritizing fraud prevention to safeguard your assets, maintain financial integrity, and ensure your success.

Here are 24 tips for protecting your business from fraud:

1. Educate your employees. Provide training that helps your employees recognize and prevent the most common types of fraud. Also, create a plan for how employees respond when they identify suspicious activity.

2. Implement background checks. Organizations lost 5% of their revenue on average to occupational fraud (fraud committed by employees) in 2022. Background checks can identify employees who may pose a risk to your company.

3. Focus on internal controls. Separating financial duties between employees, creating transparent processes, and implementing checks and balances on financial activities helps reduce the potential for employee fraud.

4. Rotate your employees. Consider moving employees to new roles after specified periods of time—this can prevent employees from colluding with their coworkers or becoming the sole owner of specific financial accounts or system information.

5. Limit system access. Develop criteria for employees to access financial and other backend systems and monitor users closely. Additionally, be sure to revoke access as employees leave or change positions.

6. Take advantage of technology. There are multiple apps and software products designed to reduce your fraud risk, both from internal and external threats. Technology also enables you to automate and scale your fraud monitoring efforts as your business grows.

7. Promote better passwords. Ensure your employees understand how to create safe passwords for your company systems. Also, reinforce the importance of keeping those passwords confidential and changing them regularly. 

8. Add multi-factor authentication. Explore security methods beyond passwords, such as biometrics and one-time passcodes. This adds another layer of protection for businesses’ sensitive financial information.

9. Encrypt your financial data. Seek out products or apps that encrypt your financial data so fraudsters can’t intercept it. Ask vendors about their encryption policies and what they mean for your business.

10. Vet your vendors. Create a due diligence process for assessing vendors and other business partners to ensure they’re not introducing risk to your business. Review contracts annually and monitor vendor invoices for signs of fraud.

11. Audit your systems annually. Audits of your financial and technology systems can identify weaknesses and illuminate areas that pose a risk to your business. Even better, the results provide a checklist for improving fraud detection and prevention.

12. Reconcile your bank accounts. This is a simple task, but one that’s easy to overlook. Reconciling your financial accounts at least monthly allows you to identify discrepancies and catch fraud early.

13. Keep a tight watch on expenses. In a similar vein, monitor your business expenses to make sure there are no unauthorized or fraudulent charges posted to your account. Connect with your business banker to learn more about your bank’s fraud protection strategies.

14. Secure your physical documents. Create a policy for maintaining, storing, and eventually destroying physical documents that contain sensitive financial information. Schedule document shredding to ensure your information doesn’t get into the wrong hands.

15. Verify customer information. Leverage cybersecurity and customer identification tools to confirm the identity of new customers and verify existing ones. These systems can flag potential bad actors for review so that you can stop payment fraud before it happens.

16. Move away from manual systems. The more you can automate your company finances, the better chance you have of avoiding fraud. That’s because automated systems typically include fraud prevention features to safeguard your business.

17. Restrict the use of company credit cards. Create a well-defined expense policy that denotes how employees can use company credit cards. Track who has company cards and set account limits for spending. 

18. Limit access to cash. Restrict who has access to cash that your company keeps on-site. Keep the funds in a locked safe or drawer, and maintain a log of who accesses the cash, the amount, the date, and the purpose of the funds.

19. Develop an ethics policy. Cultivate an ethical culture at your company that prioritizes transparency and provides guidance for how employees should behave. Include a detailed fraud policy that clarifies what your business considers fraud.

20. Create an employee hotline. Employees may not want to speak up about suspicious or unethical behavior because they’re worried about retaliation. Establish an anonymous hotline for employees to report suspected fraud safely.

21. Bring in the board. Leverage your board of directors to provide oversight of company leaders and your organization’s financial performance. Empower board members to ask questions about spending and other transactions.

22. Develop a fraud response plan. Despite your best efforts, it’s still possible for fraudsters to succeed. Minimize your losses with a fraud response plan that outlines what to do after you’ve confirmed fraud has occurred.

23. Obtain insurance coverage. Explore insurance products that offer coverage for fraud-related crimes, such as employee theft and forgery and online or payment fraud.

24. Keep your fraud knowledge fresh. Stay updated on common fraud schemes. The fraud landscape changes quickly, and you want to know about the latest risks and evolving best practices for prevention.

Stay safe in 2024.

Fraud risk is a reality of doing business. But by implementing a combination of these tips you can reduce the potential that your business is a victim. Interested in learning more about fraud prevention? Head to valley.com/security to learn more and see how Valley can help.

If you believe you have been a victim of fraud or you’re unsure, please contact your Banking Team, reach out to Valley Customer Care at 800-522-4100, or connect with us at valley.com/security.

 

This article is intended for educational purposes only. Statements of fact and opinions expressed are solely of the writer and, unless expressly stated to the contrary, are not the opinion or position of Valley Bank. Valley Bank does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented. This article does not, and should not be relied upon to, replace the advice of your own professional legal, tax and financial advisors.

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