When you are running your business, whether new or old, small medium or large, one of the things that you need to anticipate is “How to deal with fraud?”
There are many “warning signs” that can help you avoid being a victim. Anticipating that fraud attempts are going to occur, putting preventative measures in place may be your best defense. It is not a question of “if” your organization might be a potential victim of theft or fraud; it is only a question of “when.”
Who commits fraud or theft? Potentially everyone. Unfortunately, thieves do not wear a mask and hide in the shadows, there is no stereotypical thief, it could be anyone, even someone you trust. It is important to trust people and not be paranoid; however, “good business” practices should include watching for things that look or seem to be out of place.
Customers who insist on paying by cheque. Most businesses no long accept customer payments by cheque; the delay of confirming the money is simply too long and there are so many easier and more secure ways to pay. Before accepting a cheque, consider:
- Do you know the customer? Taking a cheque from a regular customer substantially reduces the risk of fraud.
- Ask for photo identification and match the picture to their face. Make sure you explain the reasons why you are doing this, so you do not offend a good customer, it is for their protection as much as it is for the organization.
- Delay delivery of the purchase until the cheque clears (21 business days). If the cheque is for a large amount, consider having the cheque certified in order to reduce the wait period.
- Call your bank and ask them to place a hold on the funds, some will some will not, but it does not hurt to ask.
People who over-react to simple situations? Not all thieves are quiet and hide in shadows, some are loud and belligerent and try to intimidate your associates into “bending the rules” or “making exceptions” just to avoid making a scene. The best defense is to have a layered response to upset customers. Your front-line associates should be comfortable requesting assistance from a supervisor or manager and having a manager step in and help can make a huge difference in reversing a potential “bully” from intimidating someone.
Someone using someone else’s credit card. Perhaps it is legitimate perhaps it is not. Remember these are warning signs to pay attention to.
Sales that are too good to be true. For example, if a customer wants to order a large amount of merchandise, let us say $8,000 worth of items with less than 30 minutes before the store closes. The “customer” explains they are moving “tonight” and they needed some “last minute” items and he would send a truck before we closed. A few additional warning signs that should have been noted:
- Nobody does this, not for $8,000.
- The customer is not in the store and has never been in our store.
- The people picking up the order were different from the person buying the order.
- Examine the day of the week, in this actual scenario, the customer wanted to purchase on a Tuesday and it was the third week of the month, people tend to be under pressure to move at the start, middle, or end of the month, not on a Tuesday.
E-transfers, watch your assets. E-transfers are fast, easy, and they can be very secure; however, speak to your bank about measures to have in place to prevent fraud and make sure your associates are trained properly.
Over the phone credit applications. It is difficult to verify who someone is over the telephone or on-line; and yes, it is true that many places will allow you to do applications without actually being in front of you. If you do this, know that the risk of fraud increases quite dramatically.
Returns without a receipt, returns of gifts for cash. As a retailer you can set your “returns policy,” be clear and concise. Have procedures in place to accommodate returns without receipts and for people wanting to return gifts. The potential for fraud can be very high on electronic items such as televisions, but it can also extend to any other types of products.
Your associates. Treat your people well, treat them with dignity and respect, pay competitive salaries, build your culture based on “trust”, and acknowledge that they are major contributors to the organization’s success. They should feel comfortable telling you or their supervisor about someone acting unusually. For example, a local business had a situation where an associate was always going out to our dumpster at weird intervals. Another associate decided to check it out, and found three small televisions in the dumpster. The first associate had placed the TV’s in the dumpster carefully and had planned to return later that night to retrieve them. The older associate felt a responsibility to the company and advised her supervisor and the situation was handled without drawing attention to her.
Bottlenecks and pivot points. Build processes to double check everything that is done in your organization. If you have only one person who does your “books” or writes the cheques, ensure that you have an auditor who reviews everything regularly. It is not just for theft; sometimes a bookkeeper can have instructions not to pay an account because of regular disputes such as short shipping. However, if not monitored the organization may suffer if the vendor stops shipments on all of the company’s orders in retaliation.
Theft can be big and it can be small. Associates, who are not treated well, may feel entitled and may not have any issue stealing things like office supplies or other things. Have systems in place so people know that things are counted. Many thefts happen because the thief thinks no one will notice.
Organizations can commit fraud. Build checks and balances into to accounts payable and service procedures. Match packing slips to purchase orders to invoices, routinely audit your service claims and other expenses, some times mistakes happen, sometimes they are not mistakes. Have procedures in place to deal with any discrepancies and/or false invoices and pricing errors.
Insurance fraud. Health and Safety systems are important for your staff and your customers. Having systems and procedures in place will help protect them and your organization. There are people who may be looking to take advantage of organizations by faking a fall. These situations are not common, but they do happen. Ensure your systems mitigate your exposure and keep good records. In addition, consider equipping your vehicles with dashboard cameras to record incidents your vehicles are involved with.
Safeguard your computer network – Phishing. Most businesses are completely reliant on their computer network and databases. Phishing emails appear to be from a legitimate sender, but they are actually designed to capture valuable data like bank information, passwords or credit card numbers. Speak to your bank, IT provider, and insurance provider about systems that you can implement. Make sure your firewalls and anti-virus software are up to date. Train your associates on how to recognize phishing emails.
Office supply frauds – These types of frauds have existed for decades. A person will call or email to “remind” you it’s time to re-order whatever common product you might buy, toner, paper, light bulbs are all commonly used supplies. If you are tricked into agreeing, you will soon receive an order of overpriced merchandise. Be sure your staff knows about this fraud, and set up ordering procedures that require a purchase order and an approval signature.
Business Directories. Although less common now, train your office associates to be wary of any calls from organizations wanting to update your information for their directory. What might seem like a normal and innocent request may result in an expensive charge to list your computer on a non-existent or unwanted listing.
Visitors to your organization. One thing that many thieves have in common is confidence. Have procedures in place to limit unauthorized people from accessing your non-public offices and storage areas. Many people would not suspect mail carriers, delivery people, repair people, or other visitors; when in fact anyone of them might be “casing” your organization for things of value. Audit your security precautions and test them because you might find that your security protocols are not being fully utilized by some or many of your associates.
This is not an exhaustive list, but a sampling of some of the things that any organization can fall victim to. A little paranoia may not be a bad thing, making a profit in your business is hard work and to have that “stolen” can have a significant cost. For charities and non-profit organizations, the potential of fraud and loss can significantly impact your ability to help vulnerable people. It would be a shame to see that erased by someone who makes you a victim of fraud. Awareness and preparation can make all the difference.