Six ways to protect your business from fraud

Netcash CEO, Charles Pittaway

Here is our list of the six most important things you can do to protect your business from fraud:

1. Protect your identity

   This goes for companies as well as individuals. To open an account in your company name and start trading, a fraudster needs access to your company letterhead, copies of directors' ID documents and company documents such as statements of incorporation or shareholders' agreements. Most of the time they trip up because one or more of these things is missing - but we're seeing more and more sophisticated fraudsters who have all the documents they need. Personal ID documents and company documents are precious - guard them well. And if you can possibly avoid it, don't put bank account details on your website for all to see.

2. Check our your clients

   In a shaky economy we all want new clients, but it's important to resist the temptation to ease off on vetting and credit checks. And if you don't already vet and credit check your customers, now is the perfect time to start. Make sure your application process captures all the information you need, and that you actually check it out. Verify the creditworthiness of all your new clients - and if the new client is a company, don't forget to run credit checks on their directors as well.

3. Have a process for managing bad debt

   Bad debts are inevitable, but you can spare yourself a lot of pain by working out in advance how you will deal with them. The process starts with vetting your clients, and setting up clear agreements with them that specify when they need to pay. Think about your collection process and how you will deal with defaulters. Having templates of letters you may need, for example, can save a lot of time and effort.

4. Understand your risk profile

   Different kinds of businesses face different kinds of fraud risk. If you're dealing in goods or commodities, especially if you have to deliver COD for cheque or credit card payments, the risks are clear. Avoid cheques as far as possible, and make it easy for your customers to pay directly into your account or via credit card. The credit card option doesn't have to be too expensive - it's worth investigating some of the newer services.

   Similarly, if you allow people to open accounts you're at risk of non-payment. Customers demand all these facilities, but they can make life more difficult for you. Again, thorough checking is the best way to protect yourself.

5. Don't neglect the basics

   Stolen credit cards are one of the most common forms of fraud, but also one of the easiest to detect. If a cardholder claims a transaction was fraudulent, the onus is on you to prove otherwise. Checking the signature on the card against the signed slip is a basic step that cashiers hardly ever take. Train your staff to do this, and explain why.

6. Use the services available to you

   As a small business owner you can't be a fraud prevention expert on top of everything else. But there are many services in the market to help you check credit records and identify suspicious credit cards and accounts; use them.