Fraud and cybercrime are detrimental for small businesses and can be expensive and time-consuming problems to mitigate. As reported by CNBC, US consumers lost $16 billion to fraud in 2016. While the majority of those losses affected online retailers, a report prepared by Aite Group LLC found that brick-and-mortar merchants were hit with $5.8 billion in chargebacks. To avoid the costly headache of dealing with financial fraud, small business owners need to take measures to ensure they are protected. Here are some steps Los Angeles-based small business owners can take to help them detect fraud before they become victims.
Become Chip Card Compliant
In October 2015, the US financial system adopted a new standard for processing credit card transactions to reduce fraud. The EMV (Europay, MasterCard© and Visa©) standard requires that banks replace old magnetic strip cards with new microchip-embedded models and that merchants equip their POS terminals with chip readers. In the event of a fraudulent credit card sale, the party that is not EMV compliant will be held liable for the transaction. If you don’t want your company to be hit with costly chargebacks, which occur when issuing banks forcibly return money to customers to settle a dispute, you need to update your checkout system ASAP.
Beef Up Digital Security
Another danger small business owners need to be aware of is online fraud. As the world’s financial system has become more digitized, thieves have taken to designing sophisticated malware programs to access sensitive merchant and consumer data. As a recent study sponsored by IBM found, the stolen funds, fines and loss of consumer confidence that follow a data breach can cost a business hundreds of thousands of dollars. It’s in your best interest to invest in a quality data security solution.
Create A Data Security Policy
In addition to using comprehensive security software, small business owners should protect their most sensitive information by instituting data security best practices. Make sure that your company has policies in place to educate staff and ensure adherence to anti-fraud practices. That means training your staff to identify common social engineering and online phishing scams, requiring regular password updates, strictly controlling access to sensitive data, banning the personal use of company computers and creating a data breach response plan.
Watch Out For Employee Theft
While it’s essential for small business owners to protect themselves from external dangers, they should also be wary of internal threats. Indeed, a recent survey found that US businesses lose $60 billion a year to shrinkage, the leading cause of which is employee theft. To prevent against potential debilitating losses, owners should perform a thorough background check on all potential hires. Additionally, it’s important to conduct regular petty cash and accounts audits, limit access to bulk inventory and carefully monitor customer orders for signs of fraud. Protecting against fraud means taking preventative active against internal as well as external threats.
Unless otherwise stated, opinions expressed are those of the respective authors and not necessarily those of the sponsoring party, City National Bank (CNB). The information is provided without warranty and no recommendation or endorsement by CNB is intended or should be inferred unless specifically stated.
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