How to Protect Your Startup From Fraud

Wednesday, April 29, 2020, 6:00 AM | Leave Comment

Fraud is one of the ways your startup could be losing money. Now, fraud refers to any dishonest and illegal activities perpetrated by criminals in or out of your business to gain financially.

The problem is that there are various types of frauds that your startup can be susceptible to.

The most common ones are the likes of cyber fraud, employee and insider fraud, customer-related fraud, etc.

You need to know how to protect your business from these types of fraud. Let’s cover some of the simple ways to do so.

  • Authenticate all your transactions

    Embezzlement of funds within your startup is common in large financial transactions, making them hard to spot. One way to protect against this is to add a layer of authentication to critical transactions. You can have two separate members of staff with different duties authorize transactions.

    For example, when purchasing a bulk of IT equipment, you can have a member of the Human Resource department or accounting department on board to cross-check the financial figures. This can help prevent any collusion between the members of the same department from taking financial advantage of your business by inflating the cost.

  • Show vigilance

    As a startup owner, it is your duty to actively and frequently review the financial records of your business. Although you may have hired accountants to do the heavy lifting, you will have to pay attention to and track monetary records meticulously. As the business owner, make a point to get a rough picture of how financial numbers should look like within the operations of your business. This way, you will be in a position to question any figure that is out of the ordinary.

    Besides, it is vital for you to spot-check financial reports on expenditures and income flow and highlight anything questionable. Follow up with the right staff if the discrepancy you identified alarms you.
    At the very least, you will have to keep your financial team on toes and make them know that you are watching closely. That will discourage inside fraud in your business.

  • Reduce cyberattack risks

    Using the right tech in your business is a significant step to make sure that you increase efficiency in your business. However, that comes with its fair share of possible risks and threats that may lead to fraud.

    Critical among them are cyber attack related fraud. Well, Cyberattacks are targeting businesses, including startups, are growing around the world. That is why it is necessary to understand potential cyberattacks and find ways to deal with them to secure your business.

    The common cyber attacks you should know to include the following:

    • Phishing attack: This is a common attack where criminals work can dupe employers in your business through a disguise, thus gaining access to critical data.

    • Distributed Denial of Service (DDoS): this attack is a coordinated effort aimed at crashing the servers of your company by sending multiple requests.

    • SQL Injection: It targets the application layer of websites. The hackers, therefore, take advantage of shoddy web development techniques and the inadequate database security to steal the contents of an entire database.

    Fortunately, most cyberattacks methods can be prevented. To protect your business from cyberattacks, you need to do the following:

    • Incorporate security measures in all your processes. You may want to consider outsourcing network managed services from IT experts to secure your computer network and systems from attacks.

    • Update software. Make a point of updating the software of your business computers to the latest versions. Outdated software can have loopholes that may expose your computer to the cyber attacker, giving them a room to access your data.

    • Prepare a response plan. One way to do so is by training your staff on what to do in case they suspect any attempts by cyber attackers to access the business systems.

  • Keep critical documents safe

    The importance of keeping your documents in a secure place cannot be emphasized enough when it comes to preventing fraud. You should store all your critical financial documents properly, perhaps in a safe. You can also consider storing documents in digital formats but in a secure storage place as well. You should also ensure you properly discard all the documents and data that might be used in fraud.

Final remarks

Fraud is a threat to your business as you can lose a lot of cash. Sadly, it comes in various forms that keep evolving. Understanding the types of fraud and the way to deal with them is the key to prevention. So, try to audit your business and seal every loophole that might be used for fraud.

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