Small Business: Ways to Avoid Fraud & Protect Your Business This Holiday Season

The holidays can make or break the year for some small businesses, especially with the shopping-heavy events of Black Friday and Small Business Saturday. In fact, some companies report that over 75% of their revenue is generated in Q4[i]. Given the vital importance of holiday season shopping (whether in-person or virtual) to many small business bottom lines, it’s never more essential to be aware of and put systems in place to combat fraudulent customer activity. Here are some ways to do that.

Start with your employees

Business owners may find their loyal sales associates are more likely to remember fraud training from the past, and possibly to take fraud prevention more seriously. So it may be wise to avoid hiring temporary employees when possible. If you do end up hiring staff to help cover the holiday rush, ask them to share any familiarity they have in dealing with fraud, or what they know about business fraud. They may have prior experience they can apply to your own company.

Whether your help is new, temporary or has been around for years, business owners can help decrease the opportunity for fraud by teaching employees how to spot fraud. For example, some common ways that fraud is presented includes:

• Security features like the three-digit security code on the back of a credit card or the magnetic strip seem damaged or altered in some way. (On a related note, it's smart to use this as an opportunity to check in on your merchant services — and the fraud protection they provide — ahead of the holidays, too.)
  
  
• The last four digits shown on the receipt after a transaction are different from the last four numbers on the actual card.
  
  
• The same customer comes back for multiple orders in a short time or orders an abnormally large amount of the same item.

Institute a proper chain of command for what employees should do if they suspect fraud, as well. Time is essential when fraud is involved, and this way everyone understands how to handle a situation when and if it occurs.  

Establish tighter fraud controls

The holiday season can get hectic, so it's important that businesses stay vigilant regarding fraud awareness. Start by discussing with employees ahead of time some of the new systems you’ll be implementing to help combat fraud. These might include:

• Asking for a photo ID from customers to go along with the payment of purchases over a certain dollar amount.
  
  
• Requiring a signature for any at-home deliveries to customers.
  
  
• Sticking with traditional payment methods and avoiding uncommon ones like reloadable cards, wire transfers, or the use of multiple credit cards for a single transaction.
  
  
• Updating password protocols and/or limiting the number of people who have access to your business data through the computer system. You could also institute multi-factor authentication on your web-based company accounts to make them harder to access.
  
  
• Following through on a stricter policy regarding personal computer use while at work. This helps avoid any issues that could occur when employees accidentally open malicious emails on company equipment. (Learn more about the dangers of opening malicious emails — and how to spot them — here.)

Institute more frequent reviews

Employee training aside, the faster you can catch fraudulent activity, the more quickly you’ll be able to handle it and mitigate the impact. The management team can help by:

• Reviewing sales records more frequently. Look back at what your past few years of holiday season sales have looked like to notice any glaring differences that may tip you off to fraudulent activity.
  
  
• Being physically present for increased on-site reviews.
  
  
• Verifying that all credit card POS technology is secure and up to date.
  
  
• Regularly backing up the data on your business computers and devices.

Get professional backup

Many companies offer fraud protection services for business these days. Look for those that provide excellent protection against chargebacks and that have 24/7 customer service. 

Follow up with your business banking representative, too. They are often great resources for additional fraud prevention tools and resources to help mitigate loss. You could also consider hiring a cybersecurity consultant to help ensure your systems are as safe as possible. At the very least, make sure your fraud prevention software is current and can handle the basics, like detecting fraudulent debit, check and automated clearing house (ACH) transactions. Double-check what types of fraud might be covered under your small business insurance, as well, including physical assets and cash losses.  

Sadly, the most wonderful time of the year can also often be the most fraudulent one for small businesses. Luckily, business owners have more tools and knowledge at their disposal to help combat fraud than ever before. A little research can go a long way when it comes to catching fraud before it occurs. Working with a bank that helps protect your assets is also essential.

For more ways to protect your business during the busy holiday season, follow this fraud prevention checklist and check out what other security resources are available for small businesses.